Scorpio Tankers(STNG) - 2022 Q3 - Quarterly Report

Financial Highlights Third Quarter 2022 Financial Performance Scorpio Tankers achieved a significant financial turnaround in Q3 2022, reporting substantial net income and adjusted net income, driven by a strong tanker market Q3 Financial Performance Comparison (2022 vs. 2021) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Income / (Loss) | $266.2 million | ($73.3 million) | | Basic EPS / (LPS) | $4.84 | ($1.34) | | Diluted EPS / (LPS) | $4.31 | ($1.34) | | Adjusted Net Income / (Loss) | $264.8 million | ($76.1 million) | | Adjusted Basic EPS / (LPS) | $4.81 | ($1.39) | | Adjusted Diluted EPS / (LPS) | $4.29 | ($1.39) | Nine Months 2022 Financial Performance For the first nine months of 2022, the company achieved substantial net income, reversing prior-year losses and reflecting sustained positive market conditions Nine-Month Financial Performance Comparison (2022 vs. 2021) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Net Income / (Loss) | $372.8 million | ($188.4 million) | | Basic EPS / (LPS) | $6.74 | ($3.46) | | Diluted EPS / (LPS) | $6.07 | ($3.46) | | Adjusted Net Income / (Loss) | $446.0 million | ($184.5 million) | | Adjusted Basic EPS / (LPS) | $8.06 | ($3.38) | | Adjusted Diluted EPS / (LPS) | $7.21 | ($3.38) | Operational and Corporate Developments Time Charter Equivalent (TCE) Revenue Performance The company experienced a dramatic increase in earnings, with average daily TCE revenue surging in Q3 2022 across all vessel classes, and Q4 2022 bookings indicate continued strength Q4 2022 Bookings Summary (as of Nov 1, 2022) | Vessel Class | Avg. Daily TCE Revenue | % of Days Booked | | :--- | :--- | :--- | | LR2 | $58,000 | 55% | | MR | $43,000 | 42% | | Handymax | $44,000 | 36% | Q3 2022 Achieved TCE Revenue | Vessel Class | Pool / Spot TCE | Time Charters TCE | | :--- | :--- | :--- | | LR2 | $50,765 | $26,710 | | MR | $42,463 | $20,548 | | Handymax | $46,231 | N/A | Capital Allocation and Shareholder Returns The company maintained its commitment to shareholder returns by declaring a quarterly cash dividend and actively repurchasing common shares, signaling confidence in its financial position - The Board of Directors declared a quarterly cash dividend of $0.10 per common share[9] - Since July 2022, the company has repurchased 3,120,341 of its common shares at an average price of $38.66 per share[12] - A new Securities Repurchase Program was authorized on October 31, 2022, allowing for the purchase of up to $250 million of the Company's securities, including common shares and notes[12][14] Fleet and Debt Management The company is actively managing its fleet and balance sheet by exercising purchase options on 17 vessels to reduce debt, complemented by vessel sales and multiple debt repayments - The company has given notice to exercise purchase options on an aggregate of 17 vessels, which is expected to result in a debt reduction of $302.2 million[12] - In 2022, the company sold 18 vessels (3 LR2s, 12 LR1s, 3 MRs), raising a total of $265.3 million in new liquidity after debt repayment[13] - In August 2022, the company exercised purchase options on six MR product tankers, resulting in an aggregate debt reduction of $95.0 million[12][16] - In October 2022, the company repaid $17.5 million in outstanding debt for one LR2 product tanker[12][22] Financial Position and Outlook Liquidity As of October 28, 2022, Scorpio Tankers maintained a strong liquidity position with $490.9 million in unrestricted cash and cash equivalents, with additional funds anticipated from Scorpio pools - As of October 28, 2022, the Company had $490.9 million in unrestricted cash and cash equivalents[30] - An additional estimated $105 million was expected from Scorpio pools for the October monthly cash distribution[30] Debt Profile The company has actively reduced its gross debt to $2.44 billion as of October 28, 2022, with a detailed repayment schedule outlining significant maturities and scheduled repayments through 2024 and beyond Debt and Net Debt Summary (in thousands USD) | Date | Gross Debt Outstanding | Cash and Cash Equivalents | Net Debt | | :--- | :--- | :--- | :--- | | June 30, 2022 | $2,652,424 | $359,528 | $2,292,896 | | Sep 30, 2022 | $2,478,885 | $467,635 | $2,011,250 | | Oct 28, 2022 | $2,442,835 | $490,903 | $1,951,932 | Future Principal Repayment Schedule (as of Sep 30, 2022, in millions USD) | Period | Total Repayments | Vessel Repurchases | Scheduled Repayments | | :--- | :--- | :--- | :--- | | Q4 2022 | $259.2 | $218.8 | $40.4 | | Q1 2023 | $78.9 | $27.8 | $51.1 | | Q2 2023 | $84.1 | $27.8 | $56.3 | | Q3 2023 | $77.4 | $27.8 | $49.6 | | 2024 and thereafter | $1,887.6 | — | $1,613.8 | Capital Expenditures The company has outlined its estimated capital expenditures for drydocks, ballast water treatment systems, and scrubber installations through 2023, with the largest outlays expected in Q4 2022 and Q1 2023 Estimated Capital Expenditures and Offhire Days (2022-2023) | Period | Aggregate Costs (millions USD) | Aggregate Offhire Days | Vessels Commencing Work | | :--- | :--- | :--- | :--- | | Q3 2022 (actual) | $3.6 | 71 | 4 MRs | | Q4 2022 (est.) | $12.5 | 139 | 5 MRs | | Q1 2023 (est.) | $12.8 | 150 | 4 MRs | | Q2 2023 (est.) | $9.3 | 190 | 5 MRs | | Q4 2023 (est.) | $2.0 | 40 | 1 MR | Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Income or Loss The income statement highlights a substantial increase in vessel revenue to $490.0 million in Q3 2022, leading to an operating income of $305.7 million compared to a loss in the prior-year quarter Condensed Consolidated Statements of Income or Loss (in thousands USD) | | For the three months ended Sep 30, | For the nine months ended Sep 30, | | :--- | :--- | :--- | | | 2022 | 2021 | 2022 | 2021 | | Vessel revenue | $489,996 | $119,271 | $1,069,116 | $392,878 | | Total operating expenses | ($184,269) | ($159,711) | ($580,654) | ($473,323) | | Operating income / (loss) | $305,727 | ($40,440) | $488,462 | ($80,445) | | Total other expense, net | ($39,562) | ($32,827) | ($115,614) | ($107,998) | | Net income / (loss) | $266,165 | ($73,267) | $372,848 | ($188,443) | Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2022, shows total assets of $4.65 billion and total liabilities of $2.53 billion, reflecting strong cash generation with increased cash and cash equivalents Condensed Consolidated Balance Sheets (in thousands USD) | | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $467,635 | $230,415 | | Total current assets | $751,112 | $289,227 | | Total non-current assets | $3,900,677 | $4,724,742 | | Total assets | $4,651,789 | $5,013,969 | | Liabilities & Equity | | | | Total current liabilities | $488,583 | $527,841 | | Total non-current liabilities | $2,041,825 | $2,649,200 | | Total liabilities | $2,530,408 | $3,177,041 | | Total shareholders' equity | $2,121,381 | $1,836,928 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash inflow from operating activities significantly improved, with investing activities providing substantial cash from vessel sales, offset by financing outflows Condensed Consolidated Statements of Cash Flows (Nine Months Ended Sep 30, in thousands USD) | | 2022 | 2021 | | :--- | :--- | :--- | | Net cash inflow from operating activities | $452,988 | $23,080 | | Net cash inflow / (outflow) from investing activities | $581,969 | ($47,709) | | Net cash (outflow) / inflow from financing activities | ($797,737) | $29,538 | | Increase in cash and cash equivalents | $237,220 | $4,909 | Supplementary Information Other Operating Data Adjusted EBITDA for Q3 2022 saw a substantial increase to $360.0 million, with fleet average TCE per revenue day rising significantly, while vessel operating costs per day experienced a slight increase Key Operating Metrics (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Adjusted EBITDA (in thousands) | $360,013 | $25,365 | | Fleet TCE per revenue day | $44,222 | $10,139 | | Vessel operating costs per day | $7,256 | $7,126 | Fleet List As of October 31, 2022, Scorpio Tankers' fleet comprised 113 product tankers with an average age of 6.8 years, consisting of LR2, MR, and Handymax vessels employed in pools or on time charters - The company owns, lease finances, or bareboat charters-in 113 product tankers[62] - Fleet composition: 39 LR2 tankers, 60 MR tankers, and 14 Handymax tankers[62] - The average age of the fleet is 6.8 years[62] Dividend Policy The company has consistently paid a quarterly dividend of $0.10 per share throughout 2021 and 2022, with another $0.10 per share dividend declared for December 2022, subject to Board discretion - On October 31, 2022, the Board of Directors declared a quarterly cash dividend of $0.10 per common share, payable on or about December 15, 2022[59] Dividends Paid per Common Share | Date Paid | Dividend | | :--- | :--- | | March 2021 | $0.10 | | June 2021 | $0.10 | | September 2021 | $0.10 | | December 2021 | $0.10 | | March 2022 | $0.10 | | June 2022 | $0.10 | | September 2022 | $0.10 | Market Risks and Outlook The company acknowledges ongoing market volatility from the COVID-19 pandemic and the significant impact of the military conflict in Ukraine, which has disrupted trade routes and supply chains for petroleum products - The COVID-19 virus is expected to continue causing volatility in commodities markets, and the full scale and duration of its impact remain unknowable[60] - The conflict in Ukraine has disrupted the supply of Russian oil, leading to significant price volatility and changes in trade routes for petroleum products, which could adversely affect financial results[61] Non-IFRS Measures This section provides reconciliations for non-IFRS financial measures, including Adjusted Net Income and Adjusted EBITDA, to their most directly comparable IFRS measures Reconciliation of Net Income to Adjusted Net Income (Q3 2022, in thousands USD) | Description | Amount | | :--- | :--- | | Net income | $266,165 | | Net gain on sales of vessels | ($2,732) | | Write-offs of deferred financing fees | $1,443 | | Gain on repurchase of Convertible Notes | ($69) | | Adjusted net income | $264,807 | Reconciliation of Net Income to Adjusted EBITDA (Q3 2022, in thousands USD) | Description | Amount | | :--- | :--- | | Net Income | $266,165 | | Financial expenses | $42,302 | | Financial income | ($2,183) | | Depreciation | $50,989 | | Amortization of restricted stock | $5,472 | | Net gain on sales of vessels | ($2,732) | | Adjusted EBITDA | $360,013 |