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Form 6-K Scorpio Tankers Inc. For: Jul 29

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July 29, 2015 3:26 PM EDT

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549
 

FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934


For the month of July 2015


Commission File Number: 001-34677


Scorpio Tankers Inc.
(Translation of registrant's name into English)

9, Boulevard Charles III, Monaco 
98000 (Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [X]   Form 40-F [   ]
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [   ].
 
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [   ].
 
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
 
 
 
 
 
 

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Attached to this Report on Form 6-K as Exhibit 99.1 is a press release issued by Scorpio Tankers Inc. (the "Company") on July  29, 2015 announcing financial results for the second quarter of 2015, agreements for four newbuilding contracts, and declaration of a quarterly dividend.
 
The information contained in this Report on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 (File no. 333-186815) that was filed with the U.S. Securities and Exchange Commission effective February 25, 2013.
 
 
 
 
 
 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   SCORPIO TANKERS INC.
    (registrant)
 Dated: July 29, 2015  
   By: /s/ Brian Lee                                                               
 
 Brian Lee
 
 Chief Financial Officer
 

 
Exhibit  99.1
 
Image
 
 
Scorpio Tankers Inc. Announces Financial Results for the Second Quarter of 2015, Agreements for Four Newbuilding Contracts, and Declaration of a Quarterly Dividend
 
MONACO--(Marketwired - Jul 29, 2015) - Scorpio Tankers Inc. (NYSE: STNG) ("Scorpio Tankers," or the "Company") today reported its results for the three and six months ended June 30, 2015.
 
Results for the three months ended June 30, 2015 and 2014
 
For the three months ended June 30, 2015, the Company's adjusted net income was $57.5 million, or $0.35 basic and $0.32 diluted earnings per share, which excludes an unrealized gain on derivative financial instruments of $0.1 million, or $0.00 per basic and diluted shares (see non-GAAP Measures section below). For the three months ended June 30, 2015, the Company had net income of $57.6 million, or $0.35 basic and $0.32 diluted earnings per share. 
 
For the three months ended June 30, 2015, the Company's basic and diluted weighted average number of shares were 162,457,319 and 199,202,256, respectively. The diluted weighted average number of shares includes the potentially dilutive shares relating to our Convertible Senior Notes due 2019 (the "Convertible Notes") representing 31,094,568 potential common shares (see below for further information).
 
For the three months ended June 30, 2014, the Company had an adjusted net loss of $11.2 million (see Non-GAAP Measures section below), or $0.06 basic and diluted loss per share, which excludes (i) a gain of $10.9 million, or $0.06 per share, resulting from the acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian LPG Ltd. ("Dorian"), (ii) a write-off of deferred financing fees of $0.3 million, or $0.00 per share and (iii) an unrealized gain on derivative financial instruments of $64,769, or $0.00 per share. For the three months ended June 30, 2014, the Company had a net loss of $0.6 million, or $0.00 basic and diluted loss per share.
 
Results for the six months ended June 30, 2015 and 2014
 
For the six months ended June 30, 2015, the Company's adjusted net income was $96.8 million, or $0.62 basic and $0.55 diluted earnings per share, which excludes (i) a gain of $2.0 million, or $0.01 per basic and diluted shares, related to the closing of the sales of Venice, STI Harmony and STI Heritage and (ii) an unrealized loss on derivative financial instruments of $0.5 million, or $0.00 per basic and diluted shares (see non-GAAP Measures section below). For the six months ended June 30, 2015, the Company had net income of $98.3 million, or $0.63 basic and $0.56 diluted earnings per share. 
 
 
 
1
 
 
 
For the six months ended June 30, 2014, the Company had an adjusted net loss of $9.4 million (see Non-GAAP Measures section below), or a $0.05 basic and diluted loss per share, which excludes (i) a gain of $51.4 million, or $0.27 per share, resulting from the sales of seven Very Large Crude Carriers ("VLCCs") under construction, (ii) a gain of $10.9 million, or $0.06 per share, resulting from the acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian, (iii) a write-off of $0.3 million of deferred financing fees, or $0.00 per share and (iv) an unrealized gain on derivative financial instruments of $0.1 million or $0.00 per share. For the six months ended June 30, 2014, the Company had net income of $52.8 million, or $0.28 basic and diluted earnings per share.
 
Newbuilding Agreements
 
The Company reached agreements to have two MR product tankers and two Handymax product tankers constructed at Hyundai Mipo Dockyard Co. Ltd. of South Korea ("HMD"). The contract price for the MR product tankers is approximately $34.5 million, and these vessels are scheduled for delivery in the first and second quarters of 2017. The contract price for the Handymax product tankers is approximately $32.5 million, and these vessels are scheduled for delivery in the second and third quarters of 2017. As part of the agreements, the Company holds certain options to construct up to six more MR product tankers and six more Handymax product tankers with fixed delivery dates and at fixed prices.
 
Declaration of Dividend
 
On July 29, 2015, the Scorpio Tankers' Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on September 4, 2015 to all shareholders as of August 14, 2015 (the record date). As of July 29, 2015 there were 182,592,121 shares outstanding.
 
Diluted Weighted Number of Shares
 
Diluted earnings per share for the three and six months ended June 30, 2015 includes the potentially dilutive shares relating to the Convertible Notes representing 31,094,568 potential common shares. The Convertible Notes were issued in June 2014. The dilutive impact of the Convertible Notes is determined using the if-converted method. Under this method, we assume that the Convertible Notes are converted into common shares during the period and the interest and non-cash amortization expense associated with these notes of $5.3 million and $10.6 million during the three and six months ended June 30, 2015, respectively, is not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive. The Convertible Notes are currently ineligible for conversion.
 
 
 
2
 
 
 
Summary of Recent and Second Quarter Significant Events:
 
 
·
Below is a summary of the voyages fixed thus far in the third quarter of 2015:
 
 
o
For the LR2s: approximately $38,000 per day for 50% of the days
 
 
o
For the LR1s: approximately $27,000 per day for 40% of the days
 
 
o
For the MRs: approximately $25,000 per day for 43% of the days
 
 
o
For the Handymaxes: approximately $21,500 per day for 36% of the days
 
 
·
Reached an agreement with an unrelated third party to purchase a 2014 built MR product tanker for approximately $37.1 million. The vessel is expected to be delivered in August 2015.
 
 
·
Reached agreements with two unrelated third parties to sell the Company's investment in Dorian LPG Ltd. ("Dorian") consisting of 6 million common shares to BW Euroholdings Limited, a wholly owned subsidiary of BW Group Limited, for a purchase price of $15.34 per share and 3,392,083 common shares to Sino Energy Holdings LLC, for a purchase price of $16.16 per share.
 
 
·
Purchased 270,349 shares of the Company's common shares that are being held as treasury shares at an average price of $10.06 per share.
 
 
·
Purchased face value of $1.5 million of the Company's 2.375% Convertible Bonds Due 2019 at 1.0881 or $1.6 million.
 
 
·
Reached an agreement with an unrelated third party to purchase an LR2 product tanker that is currently under construction at Daehan Shipbuilding Co., Ltd ("DHSC") for approximately $58.5 million. This vessel is scheduled to be delivered in August 2015 whereupon the Company will bareboat charter-in the vessel for $10,000 per day for up to nine months. The Company will take ownership of the vessel at the conclusion of the bareboat charter. 
 
 
·
Reached an agreement with an unrelated third party to purchase an MR product tanker that is currently under construction at HMD for approximately $37.0 million. This vessel is scheduled to be delivered in September 2015.
 
 
·
Executed a Senior Secured Term Loan Facility for up to $142.2 million to partially finance four LR2s. The facility bears interest at LIBOR plus a margin of 2.15% per annum and the proceeds will be used to finance up to 60% of the purchase price of the vessels specified in the facility.
 
 
 
3
 
 
 
 
·
Took delivery of eleven vessels under the Company's Newbuilding Program, five LR2s and five MRs during the second quarter of 2015 and one MR in July 2015.
 
 
 
·
Approved a new securities buyback program to purchase up to an aggregate of $250 million of the Company's common stock and bonds.
 
 
 
·
Reached agreements with two unrelated third parties to purchase an aggregate of four LR2 product tankers under construction at Sungdong Shipbuilding and Marine Engineering Co., Ltd. ("SSME") and DHSC for approximately $60.0 million each. 
 
 
 
·
Closed on an underwritten offering of 17,177,123 common shares, raising aggregate net proceeds of $152.1 million.
 
 
 
·
Paid a quarterly cash dividend on the Company's common stock of $0.125 per share in June 2015.
 
Sale of investment in Dorian LPG Ltd.
 
In July 2015, the Company announced that it agreed to sell its investment in Dorian to two unrelated third parties in two separate transactions. The Company sold 6 million shares in Dorian to BW Euroholdings Limited, a wholly owned subsidiary of BW Group Limited, for a purchase price of $15.34 per share. The Company agreed to sell 3,392,083 shares to SINO Energy Holdings LLC, for a purchase price of $16.16 per share. The sale to SINO Energy Holdings LLC is expected to close at the end of July 2015. All shares were sold pursuant to an effective resale registration statement filed by Dorian on July 8, 2015.
 
Vessel purchases
 
In July 2015, the Company reached an agreement with an unrelated third party to purchase an MR product tanker that was built in 2014 at SPP Shipbuilding Co., Ltd. of South Korea ("SPP") for approximately $37.1 million. The vessel is expected to be delivered in August 2015.
 
In July 2015, the Company reached an agreement to purchase an LR2 product tanker that is currently under construction at DHSC for a purchase price of $58.5 million. The vessel is scheduled for delivery in August 2015. Upon delivery, the Company will bareboat charter-in the vessel for up to nine months at $10,000 per day. The Company will take ownership of the vessel at the conclusion of the bareboat charter. 
 
In June 2015, the Company purchased an MR product tanker that is under construction at HMD for $37.0 million. This vessel is scheduled for delivery in September 2015. 
 
In May 2015, the Company reached agreements with two unrelated third parties to purchase an aggregate of four LR2 product tankers under construction at SSME and DHSC for approximately $60.0 million each. Two of these vessels, STI Spiga and STI Savile Row, were delivered in June 2015. The remaining two are expected to be delivered in August and September 2015, respectively. 
 
 
 
4
 
 
 
$142.2 million credit facility
 
In July 2015, the Company executed a Term Loan Facility with ABN AMRO Bank N.V. and DVB Bank SE for up to $142.2 million to partially finance four LR2s. The facility bears interest at LIBOR plus a margin of 2.15% per annum and the proceeds will be used to finance up to 60% of the purchase price of the vessels specified in the facility. 
 
The facility has a 15 year repayment profile and a final maturity of five years from the drawdown date of the loan for each vessel. The terms and conditions, including covenants, are similar to those in the Company's existing credit facilities.
 
$250 million securities buyback program
 
In May 2015, the Company's Board of Directors authorized a new securities buyback program to purchase up to an aggregate of $250 million of the Company's common stock and bonds, which currently consist of its (i) Convertible Senior Notes Due 2019, which were issued in June 2014, (ii) Unsecured Senior Notes Due 2020 (NYSE: SBNA), which were issued in May 2014, and (iii) Unsecured Senior Notes Due 2017 (NYSE: SBNB), which were issued in October 2014. This program replaces the Company's stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program.
 
During 2015 (through the date of this press release), the Company has acquired the following:
 
 
·
an aggregate of 1,016,988 of its common shares that are being held as treasury shares at an average price of $8.48 per share (270,349 shares were purchased at an average price at $10.06 under the May 2015 $250 million securities buyback program; the remaining shares were purchased in the first quarter of 2015 under the previous buyback program) . There are 182,592,121 shares outstanding as of July 29, 2015.
 
 
·
$1.5 million face value of its Convertible Senior Notes Due 2019 at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the May 2015 $250 million securities buyback program). 
 
The Company has $245.6 million remaining under its securities buyback program as of the date of this press release. The Company expects to repurchase any securities in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any securities.
 
Equity offering
 
In May 2015, the Company closed on the sale of 17,177,123 newly issued shares of common stock in an underwritten public offering at an offering price of $9.30 per share. We received aggregate net proceeds of approximately $152.1 million, after deducting underwriters' discounts and estimated offering expenses of $7.6 million.
 
 
 
5
 
 
 
Newbuilding Vessel deliveries
 
The Company has taken delivery of 11 vessels under its Newbuilding Program with HMD, DHSC, SSME, SPP and Hyundai Samho Heavy Industries Co., Ltd ("HSHI") since March 31, 2015. These deliveries are summarized as follows:
 
                 
       
Month
        
   
Name
  
Delivered
  
Type
  
Shipyard
1
  
STI Oxford
  
April 2015
  
LR2
  
HSHI
2
  
STI Queens
  
April 2015
  
MR
  
SPP
3
  
STI Osceola
  
April 2015
  
MR
  
HMD
4
  
STI Lauren
  
April 2015
  
LR2
  
DHSC
5
  
STI Connaught
  
May 2015
  
LR2
  
HSHI
6
  
STI Notting Hill
  
May 2015
  
MR
  
HMD
7
  
STI Spiga
  
June 2015
  
LR2
  
DHSC
8
  
STI Seneca
  
June 2015
  
MR
  
HMD
9
  
STI Savile Row
  
June 2015
  
LR2
  
SSME
10
  
STI Westminster
  
June 2015
  
MR
  
HMD
11
  
STI Brooklyn
  
July 2015
  
MR
  
SPP
                 
 
Fleet update
 
At the end of June 2015, one of the Company's Handymax tankers, STI Pimlico, was involved in a collision with a passenger vessel in the Dardanelles Strait in Turkey. There were no reports of injuries on either vessel; however, STI Pimlico sustained damage. The incident and the costs to repair are currently under investigation however we expect these costs to be covered by insurance, less customary deductibles. The vessel is currently being repaired and is expected to be offhire for approximately 60 days in the third quarter of 2015. 
 
Time charter-in update
 
In May 2015, the Company time chartered-in an MR product tanker for six months at $15,250 per day. The Company also has two consecutive options to extend the charter for additional six month and one year periods at $15,250 per day and $16,350 per day, respectively. 
 
 
 
6
 
 
 
In May 2015, the Company declared an option to extend the charter on an LR1 product tanker that is currently time chartered-in for one year at $12,500 per day. The agreement also contains a provision whereby the Company splits all of the vessel's profits above the daily base rate with the vessel's owner.
 
In April 2015, the Company agreed to time charter-in an MR product tanker that was under construction in South Korea. The vessel was delivered in May 2015 and is being time chartered-in for three years at $17,034 per day.
 
In April 2015, the Company extended the time charter on an LR2 product tanker that is currently time chartered-in. The term of the agreement is for one year at $24,875 per day beginning in September 2015. The Company also has an option to extend the charter for an additional year at $26,925 per day.
 
Conference Call
 
The Company will have a conference call on Wednesday, July 29, 2015 at 10:00 AM Eastern Daylight Time and 4:00 PM Central European Summer Time.
 
Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1-800-289-0438 (U.S.) or 1-913-312-0845 (International). The conference participant passcode is 6711816. The information provided on the teleconference is only accurate at the time of the conference call, and the Company will take no responsibility for providing updated information.
 
Slides and Audio Webcast:
 
There will also be a simultaneous live webcast over the internet, through the Scorpio Tankers Inc. website www.scorpiotankers.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.
 
Webcast URL: http://www.visualwebcaster.com/event.asp?id=102648
 
Current Liquidity
 
As of July 28, 2015, the Company had $247.3 million in cash. The cash balance does not include the $54.8 million proceeds from the sale of 3.4 million shares of Dorian; the sale is scheduled to close on July 29, 2015.
 
 
 
7
 
 
 
Debt
 
We made the following drawdowns from our credit facilities since March 31, 2015 and through the date of this press release:
 
                 
   
 
Credit facility
  
Drawdown amount
(in $ millions)
  
 
Drawdown date
  
 
Collateral
1
  
K-Sure Credit Facility
  
30.3
  
April 2015
  
STI Oxford
2
  
K-Sure Credit Facility
  
19.5
  
April 2015
  
STI Queens
3
  
2013 Credit Facility
  
19.3
  
April 2015
  
STI Osceola
4
  
K-Sure Credit Facility
  
30.3
  
April 2015
  
STI Lauren
5
  
K-Sure Credit Facility
  
30.3
  
April 2015
  
STI Connaught
6
  
K-Sure Credit Facility
  
21.0
  
May 2015
  
STI Notting Hill
7
  
2013 Credit Facility
  
35.1
  
June 2015
  
STI Spiga
8
  
2013 Credit Facility
  
18.5
  
June 2015
  
STI Seneca
9
  
K-Sure Credit Facility
  
21.0
  
June 2015
  
STI Westminster
10
  
K-Sure Credit Facility
  
19.5
  
July 2015
  
STI Brooklyn
11
  
ABN AMRO Term Loan Facility
  
35.7
  
July 2015
  
STI Savile Row
                 
 
As of July 29, 2015, the Company's outstanding debt balance, and amount available to draw, is as follows:
 
                       
In thousands of U.S. dollars
  
Amount outstanding at June 30, 2015
    
Amount Outstanding as of the date of this report
    
Availability as of the date of this report
      
2010 Revolving Credit Facility
   $ -     $ -       -     (1)
2011 Credit Facility
     104,944       104,944       -      
Newbuilding Credit Facility
     74,842       74,842       -      
2013 Credit Facility
     498,136       498,136       -      
K-Sure Credit Facility
     438,760       458,260       -     (2)
KEXIM Credit Facility
     417,075       417,075       -      
Nomura Term Margin Facility
     30,000       -       -     (3)
Credit Suisse Credit Facility
     -       -       61,200     (4)
ING Credit Facility
     -       -       52,000     (5)
ABN AMRO Term Loan Facility
     -       35,700       106,500     (6)
Senior Unsecured Notes
     105,500       105,500       -      
Convertible Senior Notes
     360,000       358,500       -     (7)
Total
   $ 2,029,257     $ 2,052,957     $ 219,700      
 
(1)
  
In June 2015, the 2010 Revolving Credit Facility matured and we made an $8.0 million principal payment to settle all amounts outstanding. The mortgage on STI Highlander (the vessel collateralized under this facility) was released, and the vessel is now debt free.
(2)
  
The amount outstanding as of the date of this report includes a drawdown of $19.5 million to partially finance the delivery of STI Brooklyn, which was delivered in July 2015.
(3)
  
We repaid the outstanding amount to this facility in July 2015 as a result of the sale of 6 million shares that are owned in Dorian to BW Euroholdings Limited.
(4)
  
We received a commitment for a senior secured term loan facility with Credit Suisse AG in March 2015. Availability can be used to finance the lesser of $30.6 million and 60% of each vessel's fair market value at the respective drawdown dates.
(5)
  
We entered into a Term Loan Facility for two LR2 product tankers with ING Bank N.V. in June 2015. Availability can be used to finance the lesser of $26.0 million and 47.5% of the fair market value of the respective vessels.
(6)
  
We entered into a Term Loan Facility with ABN AMRO Bank N.V. and DVB Bank SE for up to $142.2 million to partially finance four LR2s. Availability can be used to finance up to 60% of the purchase price of the vessels specified in the facility. The amount outstanding as of the date of this report includes a drawdown of $35.7 million that was made in July 2015. STI Savile Row, which was delivered in June 2015, was provided as collateral for this drawdown.
(7)
  
As of June 30, 2015, $50.5 million of this amount has been attributed to the conversion feature of the Convertible Senior Notes and recorded within additional paid in capital on the consolidated balance sheet. In July 2015, the Company repurchased $1.5 million face value of its Convertible Senior Notes Due 2019 at an average price of $1,088.10 per $1,000 principal amount.
 
 
 
8
 
 
 
Newbuilding Program
 
During the second quarter of 2015, the Company made $345.6 million of installment payments on its newbuilding vessels. 
 
The Company currently has 12 newbuilding vessel orders with HMD, DHSC, and SSME (three MRs, seven LR2s and two Handymaxes) in addition to the expected delivery of a 2014 built MR product tanker in August 2015. The estimated third quarter of 2015 and future payments are as follows*:
 
     
   
$ in millions of U.S. dollars
Q3 2015 - installment payments made
  
$
62.0
Q3 2015 - remaining installment payments**
    
204.8
Q4 2015
    
24.8
Q1 2016
    
60.6
Q2 2016
    
78.5
Q3 2016
    
33.0
Q4 2016
    
39.7
Q1 2017
    
27.3
Q2 2017
    
43.4
Q3 2017
    
3.3
Q4 2017
    
19.5
       
Total
  
$
596.9
 
*These are estimates only and are subject to change as construction progresses. 
 
** Includes the 2014 built MR product tanker at SPP that is expected to be delivered in August 2015.
 
 
 
9
 
 
 
Explanation of Variances on the Second Quarter of 2015 Financial Results Compared to the Second Quarter of 2014
 
For the three months ended June 30, 2015, the Company recorded net income of $57.6 million compared to a net loss of $0.6 million for the three months ended June 30, 2014. The following were the significant changes between the two periods:
 
 
·
Time charter equivalent, or 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 charters, time charters, and pool charters), and it provides useful information to investors and management. The following table depicts TCE revenue for the three months ended June 30, 2015 and 2014:
 
       
   
For the three months ended June 30,
  
In thousands of U.S. dollars
  
2015
    
2014
  
Vessel revenue
  
$
188,464
    
$
57,445
  
Voyage expenses
    
(1,112
)
    
(551
)
TCE revenue
  
$
187,352
    
$
56,894
  
                 
 
 
 
10
 
 
 
 
·
TCE revenue increased $130.5 million to $187.4 million. This increase was driven by an increase in the average number of operating vessels (owned and time chartered-in) to 88.2 from 49.3 for the three months ended June 30, 2015 and 2014, respectively, along with an increase in time charter equivalent revenue per day to $23,469 per day from $12,733 per day for the three months ended June 30, 2015 and 2014, respectively (see the breakdown of daily TCE averages below). Spot rates across all of our operating segments improved during the second quarter as fundamentals in the product tanker market remained strong. These fundamentals were driven by increased refining capacity in the Middle East and India along with improved refining margins worldwide which have had a resultant, positive impact on the demand for our vessels. 
 
 
·
Vessel operating costs increased $27.4 million to $41.1 million from $13.7 million for the three months ended June 30, 2015 and 2014, respectively. This increase was primarily driven by an increase in the Company's owned fleet to an average of 69.6 vessels from 21.5 vessels for the three months ended June 30, 2015 and 2014, respectively. The increase was offset by an overall decrease in vessel operating costs per day to $6,487 per day from $6,960 per day for the three months ended June 30, 2015 and 2014, respectively (see the breakdown of daily TCE averages below)
 
 
·
Charterhire expense decreased $10.3 million to $25.9 million from $36.2 million for the three months ended June 30, 2015 and 2014, respectively. This difference was driven by a decrease in the Company's time chartered-in fleet to an average of 18.6 vessels from 27.8 vessels for the three months ended June 30, 2015 and 2014, respectively.
 
 
·
Depreciation expense increased $18.1 million to $25.5 million from $7.4 million for the three months ended June 30, 2015 and 2014, respectively. This change was the result of an increase in the average number of owned vessels to 69.6 from 21.5 for the three months ended June 30, 2015 and 2014, respectively.
 
 
·
General and administrative expenses increased $3.8 million to $15.4 million from $11.6 million for the three months ended June 30, 2015 and 2014, respectively. This increase is due to the significant growth in the Company's fleet. 
 
 
·
Gain on sale of Dorian shares during the three months ended June 30, 2014 resulted from the acquisition of 7,500,000 common shares of the Company in exchange for 3,422,665 shares of Dorian in June 2014.
 
 
·
Financial expenses increased $21.4 million to $21.8 million from $0.4 million primarily as a result of an increase in the Company's debt balance in addition to a decrease in the amount of interest capitalized for the three months ended June 30, 2015 and 2014, respectively. Total debt outstanding, net of deferred financing fees, was $1.9 billion at June 30, 2015 compared to $807.5 million at June 30, 2014.
 
 
 
11
 
 
 
   
Scorpio Tankers Inc. and Subsidiaries
  
Condensed Consolidated Statement of Income or Loss
  
(unaudited)
  
   
   
For the three months ended June 30,
    
For the six months ended June 30,
  
In thousands of U.S. dollars except per share and share data
  
2015
    
2014
    
2015
    
2014
  
Revenue
                                
Vessel revenue
  
$
188,464
    
$
57,445
    
$
349,170
    
$
134,179
  
                                 
Operating expenses
                                
Vessel operating costs
    
(41,147
)
    
(13,680
)
    
(78,622
)
    
(26,750
)
Voyage expenses
    
(1,112
)
    
(551
)
    
(3,206
)
    
(4,525
)
Charterhire
    
(25,915
)
    
(36,220
)
    
(54,646
)
    
(76,393
)
Depreciation
    
(25,550
)
    
(7,369
)
    
(46,958
)
    
(13,322
)
General and administrative expenses
    
(15,451
)
    
(11,649
)
    
(29,153
)
    
(22,615
)
Gain on sale of VLCCs
    
-
      
-
      
-
      
51,419
  
Gain on sale of Dorian shares
    
-
      
10,924
      
-
      
10,924
  
Gain on sale of vessels
    
11
      
-
      
2,019
      
-
  
Total operating expenses
    
(109,164
)
    
(58,545
)
    
(210,566
)
    
(81,262
)
Operating income / (loss)
    
79,300
      
(1,100
)
    
138,604
      
52,917
  
Other (expense) and income, net
                                
Financial expenses
    
(21,840
)
    
(472
)
    
(39,898
)
    
(871
)
Realized gain on derivative financial instruments
    
15
      
-
      
55
      
17
  
Unrealized gain / (loss) on derivative financial instruments
    
64
      
65
      
(542
)
    
112
  
Financial income
    
53
      
42
      
78
      
69
  
Share of income from associate
    
-
      
898
      
-
      
573
  
Other expenses, net
    
(4
)
    
(6
)
    
(14
)
    
(53
)
Total other expense, net
    
(21,712
)
    
526
      
(40,321
)
    
(153
)
Net income / (loss)
  
$
57,588
    
$
(574
)
  
$
98,283
    
$
52,764
  
                                 
                                 
Earnings / (loss) per share
                                
                                 
Basic
  
$
0.35
    
$
(0.00
)
  
$
0.63
    
$
0.28
  
Diluted
  
$
0.32
    
$
(0.00
)
  
$
0.56
    
$
0.28
  
Basic weighted average shares outstanding
    
162,457,319
      
185,856,086
      
157,177,056
      
187,563,892
  
Diluted weighted average shares outstanding
    
199,202,256
      
185,856,086
      
193,533,559
      
190,793,888
  
                                 
 
*Diluted earnings per share for the three months ended June 30, 2015 primarily includes the potentially dilutive shares relating to our Convertible Senior Notes due 2019 (the "Convertible Notes") representing 31,094,568 potential common shares. The dilutive impact of the Convertible Notes is determined using the if-converted method. Under this method, we assume that the Convertible Notes are converted into common shares during the period and the interest and non-cash amortization expense associated with these notes of $5.3 million and $10.6 million for the three and six months ended June 30, 2015, respectively, is not incurred. Conversion is not assumed if the results of this calculation are anti-dilutive. The Convertible Notes are currently ineligible for conversion.
 
 
 
12
 
 
Scorpio Tankers Inc. and Subsidiaries
  
Condensed Consolidated Balance Sheet
  
(unaudited)
  
   
   
As of
  
In thousands of U.S. dollars
  
June 30, 2015
    
December 31, 2014
  
Assets
            
Current assets
            
Cash and cash equivalents
   $ 226,863     $ 116,143  
Accounts receivable
     77,491       78,201  
Prepaid expenses and other current assets
     9,807       2,420  
Inventories
     6,869       6,075  
Vessels held for sale
     -       70,865  
Total current assets
     321,030       273,704  
Non-current assets
                
Vessels and drydock
     2,876,519       1,971,878  
Vessels under construction
     26,788       404,877  
Other assets
     19,087       23,728  
Available for sale investment
     156,660       130,456  
Total non-current assets
     3,079,054       2,530,939  
Total assets
   $ 3,400,084     $ 2,804,643  
                 
Current liabilities
                
Current portion of long term debt
     143,181       87,163  
Debt related to vessels held for sale
     -       32,932  
Accounts payable
     22,811       14,929  
Accrued expenses
     53,087       55,139  
Derivative financial instruments
     542       205  
Total current liabilities
     219,621       190,368  
Non-current liabilities
                
Long term debt
     1,773,958       1,451,427  
Total non-current liabilities
     1,773,958       1,451,427  
Total liabilities
     1,993,579       1,641,795  
                 
Shareholders' equity
                
Issued, authorized and fully paid in share capital:
                
Share capital
     2,205       2,033  
Additional paid in capital
     1,711,120       1,550,956  
Treasury shares
     (357,189 )     (351,283 )
Accumulated other comprehensive income / (loss)
     15,403       (10,878 )
Retained earnings / (accumulated deficit)
     34,966       (27,980 )
Total shareholders' equity
     1,406,505       1,162,848  
Total liabilities and shareholders' equity
   $ 3,400,084     $ 2,804,643  
 
 
 
13
 
 
 
Scorpio Tankers Inc. and Subsidiaries
  
Condensed Consolidated Statement of Cash Flows
  
(unaudited)
  
   
   
For the six months ended June 30,
  
In thousands of U.S. dollars
  
2015
    
2014
  
Operating activities
            
Net income
   $ 98,283     $ 52,764  
Gain on sale of VLCCs
     -       (51,419 )
Gain on sale of Dorian shares
     -       (10,924 )
Gain on sale of vessels
     (2,019 )     -  
Depreciation
     46,958       13,322  
Amortization of restricted stock
     15,140       14,436  
Amortization of deferred financing fees
     7,088       468  
Straight-line adjustment for charterhire expense
     -       3  
Share of income from associate
     -       (573 )
Unrealized loss / (gain) on derivative financial instruments
     542       (112 )
Amortization of acquired time charter contracts
     346       114  
Accretion of convertible senior notes
     5,471       29  
      171,809       18,108  
Changes in assets and liabilities:
                
Drydock payments
     -       (953 )
Increase in inventories
     (1,075 )     (246 )
Increase in accounts receivable
     (3,626 )     (3,563 )
Increase in prepaid expenses and other current assets
     (7,668 )     (1,230 )
Increase in other assets
     (5,607 )     -  
Increase in accounts payable
     7,481       5,036  
(Decrease)/increase in accrued expenses
     (2,641 )     1,736  
Interest rate swap termination payment
     (128 )     (274 )
      (13,264 )     506  
Net cash inflow from operating activities
     158,545       18,614  
Investing activities
                
Acquisition of vessels and payments for vessels under construction
     (575,467 )     (455,010 )
Proceeds from disposal of vessels
     72,884       213,670  
Net cash outflow from investing activities
     (502,583 )     (241,340 )
Financing activities
                
Debt repayments
     (75,034 )     (56,056 )
Issuance of debt
     429,600       417,782  
Debt issuance costs
     (3,969 )     (36,252 )
Proceeds from issuance of convertible senior notes
     -       360,000  
Convertible senior notes issuance costs
     -       (10,803 )
Proceeds from issuance of common stock
     159,747       -  
Equity issuance costs
     (7,394 )     (42 )
Dividends paid
     (42,285 )     (33,860 )
Repurchase of common stock
     (5,907 )     (139,581 )
Net cash inflow from financing activities
     454,758       501,188  
Increase in cash and cash equivalents
     110,720       278,462  
Cash and cash equivalents at January 1,
     116,143       78,845  
Cash and cash equivalents at June 30,
   $ 226,863     $ 357,307  
 
 
 
14
 

 
   
Scorpio Tankers Inc. and Subsidiaries
  
Other operating data for the three and six months ended June 30, 2015 and 2014
  
(unaudited)
  
   
   
For the three months ended June 30,
    
For the six months ended June 30,
  
   
2015
    
2014
    
2015
    
2014
  
Adjusted EBITDA(1)(in thousands of U.S. dollars)
   $ 112,314     $ 4,316     $ 198,724     $ 20,212  
                                 
Average Daily Results
                                
Time charter equivalent per day(2)
   $ 23,469     $ 12,733     $ 22,331     $ 14,339  
Vessel operating costs per day(3)
     6,487       6,960       6,534       7,052  
                                 
Aframax/LR2
                                
TCE per revenue day (2)
     30,116       15,745       27,876       14,986  
Vessel operating costs per day(3)
     6,751       12,881       6,797       8,233  
                                 
Panamax/LR1
                                
TCE per revenue day (2)
     23,243       12,516       22,317       16,556  
Vessel operating costs per day(3)
     *       9,306       8,362       8,729  
                                 
MR
                                
TCE per revenue day (2)
     22,599       11,977       21,402       13,066  
Vessel operating costs per day(3)
     6,352       6,491       6,375       6,462  
                                 
Handymax
                                
TCE per revenue day (2)
     19,774       12,013       19,909       14,421  
Vessel operating costs per day(3)
     6,422       6,847       6,586       8,464  
                                 
Fleet data
                                
Average number of owned vessels
     69.6       21.5       66.3       20.9  
Average number of time chartered-in vessels
     18.6       27.8       19.8       29.1  
                                 
Drydock
                                
Expenditures for drydock (in thousands of U.S. dollars)
     -     $ 1,290       -     $ 1,290  
                                 
 
*In early April 2015, the Company sold STI Harmony and STI Heritage, which were the last two owned LR1 tankers in this segment. As there were only four total operating days in this segment, operating costs per day are not a meaningful metric during the three months ended June 30, 2015. 
 
(1)
  
See Non-GAAP Measure section below.
(2)
  
Freight rates are commonly measured in the shipping industry in terms of time charter equivalent per day (or TCE per day), which is calculated by subtracting voyage expenses, including bunkers and port charges, from vessel revenue and dividing the net amount (time charter equivalent revenues) by the number of revenue days in the period. Revenue days are the number of days the vessel is owned less the number of days the vessel is off-hire for drydock and repairs.
(3)
  
Vessel operating costs per day represent vessel operating costs excluding non-recurring expenses (for example insurance deductible expenses for repairs) divided by the number of days the vessel is owned during the period.
     
 
 
 
15
 
 
 
Fleet List as of July 29, 2015
 
   
Vessel Name
  
Year Built
    
DWT
    
Ice class
  
Employment
Vessel type
   
Owned vessels
                      
  1  
STI Highlander
     2007       37,145       1 A
SHTP (1)
Handymax
  2  
STI Brixton
     2014       38,000       1 A
SHTP (1)
Handymax
  3  
STI Comandante
     2014       38,000       1 A
SHTP (1)
Handymax
  4  
STI Pimlico
     2014       38,000       1 A
SHTP (1)
Handymax
  5  
STI Hackney
     2014       38,000       1 A
SHTP (1)
Handymax
  6  
STI Acton
     2014       38,000       1 A
SHTP (1)
Handymax
  7  
STI Fulham
     2014       38,000       1 A
SHTP (1)
Handymax
  8  
STI Camden
     2014       38,000       1 A
SHTP (1)
Handymax
  9  
STI Battersea
     2014       38,000       1 A
SHTP (1)
Handymax
  10  
STI Wembley
     2014       38,000       1 A
SHTP (1)
Handymax
  11  
STI Finchley
     2014       38,000       1 A
SHTP (1)
Handymax
  12  
STI Clapham
     2014       38,000       1 A
SHTP (1)
Handymax
  13  
STI Poplar
     2014       38,000       1 A
SHTP (1)
Handymax
  14  
STI Hammersmith
     2015       38,000       1 A
SHTP (1)
Handymax
  15  
STI Rotherhithe
     2015       38,000       1 A
SHTP (1)
Handymax
  16  
STI Amber
     2012       52,000       -  
SMRP(4)
MR
  17  
STI Topaz
     2012       52,000       -  
SMRP(4)
MR
  18  
STI Ruby
     2012       52,000       -  
SMRP(4)
MR
  19  
STI Garnet
     2012       52,000       -  
SMRP(4)
MR
  20  
STI Onyx
     2012       52,000       -  
SMRP(4)
MR
  21  
STI Sapphire
     2013       52,000       -  
SMRP(4)
MR
  22  
STI Emerald
     2013       52,000       -  
SMRP(4)
MR
  23  
STI Beryl
     2013       52,000       -  
SMRP(4)
MR
  24  
STI Le Rocher
     2013       52,000       -  
SMRP(4)
MR
  25  
STI Larvotto
     2013       52,000       -  
SMRP(4)
MR
  26  
STI Fontvieille
     2013       52,000       -  
SMRP(4)
MR
  27  
STI Ville
     2013       52,000       -  
SMRP(4)
MR
  28  
STI Duchessa
     2014       52,000       -  
SMRP(4)
MR
  29  
STI Opera
     2014       52,000       -  
SMRP(4)
MR
  30  
STI Texas City
     2014       52,000       -  
Time Charter (5)
MR
  31  
STI Meraux
     2014       52,000       -  
SMRP(4)
MR
  32  
STI Chelsea
     2014       52,000       -  
SMRP(4)
MR
  33  
STI Lexington
     2014       52,000       -  
SMRP(4)
MR
  34  
STI San Antonio
     2014       52,000       -  
SMRP(4)
MR
  35  
STI Venere
     2014       52,000       -  
SMRP(4)
MR
  36  
STI Virtus
     2014       52,000       -  
SMRP(4)
MR
  37  
STI Powai
     2014       52,000       -  
SMRP(4)
MR
  38  
STI Aqua
     2014       52,000       -  
SMRP(4)
MR
 
 
 
16
 
 
  39  
STI Dama
     2014       52,000       -  
SMRP(4)
MR
  40  
STI Olivia
     2014       52,000       -  
SMRP(4)
MR
  41  
STI Mythos
     2014       52,000       -  
SMRP(4)
MR
  42  
STI Benicia
     2014       52,000       -  
Time Charter (6)
MR
  43  
STI Regina
     2014       52,000       -  
SMRP(4)
MR
  44  
STI St. Charles
     2014       52,000       -  
SMRP(4)
MR
  45  
STI Mayfair
     2014       52,000       -  
SMRP(4)
MR
  46  
STI Yorkville
     2014       52,000       -  
SMRP(4)
MR
  47  
STI Milwaukee
     2014       52,000       -  
SMRP(4)
MR
  48  
STI Battery
     2014       52,000       -  
SMRP(4)
MR
  49  
STI Soho
     2014       52,000       -  
SMRP(4)
MR
  50  
STI Tribeca
     2015       52,000       -  
SMRP(4)
MR
  51  
STI Gramercy
     2015       52,000       -  
SMRP(4)
MR
  52  
STI Bronx
     2015       52,000       -  
SMRP(4)
MR
  53  
STI Pontiac
     2015       52,000       -  
SMRP(4)
MR
  54  
STI Manhattan
     2015       52,000       -  
Spot
MR
  55  
STI Queens
     2015       52,000       -  
Spot
MR
  56  
STI Osceola
     2015       52,000       -  
Spot
MR
  57  
STI Notting Hill
     2015       52,000       1 B
Spot
MR
  58  
STI Seneca
     2015       52,000       -  
Spot
MR
  59  
STI Westminster
     2015       52,000       1 B
Spot
MR
  60  
STI Brooklyn
     2015       52,000       -  
Spot
MR
  61  
STI Elysees
     2014       109,999       -  
SLR2P (3)
LR2
  62  
STI Madison
     2014       109,999       -  
SLR2P (3)
LR2
  63  
STI Park
     2014       109,999       -  
SLR2P (3)
LR2
  64  
STI Orchard
     2014       109,999       -  
SLR2P (3)
LR2
  65  
STI Sloane
     2014       109,999       -  
SLR2P (3)
LR2
  66  
STI Broadway
     2014       109,999       -  
SLR2P (3)
LR2
  67  
STI Condotti
     2014       109,999       -  
SLR2P (3)
LR2
  68  
STI Rose
     2015       109,999       -  
SLR2P (3)
LR2
  69  
STI Veneto
     2015       109,999       -  
SLR2P (3)
LR2
  70  
STI Alexis
     2015       109,999       -  
SLR2P (3)
LR2
  71  
STI Winnie
     2015       109,999       -  
SLR2P (3)
LR2
  72  
STI Oxford
     2015       109,999       -  
SLR2P (3)
LR2
  73  
STI Lauren
     2015       109,999       -  
SLR2P (3)
LR2
  74  
STI Connaught
     2015       109,999       -  
SLR2P (3)
LR2
  75  
STI Spiga
     2015       109,999       -  
SLR2P (3)
LR2
  76  
STI Savile Row
     2015       109,999       -  
SLR2P (3)
LR2
                                   
     
Total owned DWT
             4,669,129              
 
 
 
17
 
 
   
Vessel Name
  
Year Built
    
DWT
    
Ice class
  
Employment
Vessel type
  
Daily Base Rate
  
Expiry (7)
      
   
Time chartered-in vessels
                                    
  77  
Kraslava
     2007       37,258       1 B
SHTP (1)
Handymax
   $ 14,150  
18-May-16
     (8 )
  78  
Krisjanis Valdemars
     2007       37,266       1 B
SHTP (1)
Handymax
   $ 14,150  
01-May-16
     (9 )
  79  
Iver Prosperity
     2007       37,412       -  
SHTP (1)
Handymax
   $ 13,500  
03-Apr-16
     (10 )
  80  
Histria Coral
     2006       40,426       -  
SHTP (1)
Handymax
   $ 13,550  
31-Aug-15
        
  81  
Histria Perla
     2005       40,471       -  
SHTP (1)
Handymax
   $ 13,550  
31-Oct-15
        
  82  
Miss Mariarosaria
     2011       47,499       -  
SMRP(4)
MR
   $ 15,250  
26-Nov-15
     (11 )
  83  
Vukovar
     2015       49,990       -  
Spot
MR
   $ 17,034  
01-May-18
        
  84  
Targale
     2007       49,999       -  
SMRP(4)
MR
   $ 15,200  
17-May-16
     (12 )
  85  
Gan-Trust
     2013       51,561       -  
SMRP(4)
MR
   $ 16,250  
06-Jan-16
     (13 )
  86  
SN Federica
     2003       72,344       -  
SPTP (2)
LR1
   $ 12,500  
15-May-16
     (14 )
  87  
King Douglas
     2008       73,666       -  
SPTP (2)
LR1
   $ 15,000  
08-Nov-15
        
  88  
Hellespont Progress
     2006       73,728       -  
SPTP (2)
LR1
   $ 16,250  
18-Mar-16
     (15 )
  89  
FPMC P Eagle
     2009       73,800       -  
SPTP (2)
LR1
   $ 14,525  
01-Oct-15
        
  90  
Swarna Jayanti
     2010       104,895       -  
SLR2P (3)
LR2
   $ 16,250  
15-Sep-15
        
  91  
Densa Crocodile
     2015       105,408       -  
SLR2P (3)
LR2
   $ 21,050  
07-Feb-16
     (16 )
  92  
Densa Alligator
     2013       105,708       -  
SLR2P (3)
LR2
   $ 17,550  
17-Sep-16
     (17 )
  93  
Khawr Aladid
     2006       106,003       -  
SLR2P (3)
LR2
   $ 15,400  
05-Aug-15
        
                                                     
     
Total time chartered-in DWT
             1,107,434                                
 
 
 
18
 

 
   
Newbuildings currently under construction
                
   
Vessel Name
Yard
        
DWT
  
Vessel type
  94  
Hull 2473 - TBN STI Black Hawk
HMD
     (18 )     52,000  
MR
  95  
Hull S3120 - TBN STI Selatar
SSME
     (19 )     109,999  
LR2
  96  
Hull S3121 - TBN STI Rambla
SSME
     (19 )     109,999  
LR2
  97  
Hull S3094 - TBN STI Kingsway
SSME
     (19 )     109,999  
LR2
  98  
Hull S3079 - TBN STI Carnaby
SSME
     (19 )     109,999  
LR2
  99  
Hull 5003 - TBN STI Grace
DHSC
     (20 )     109,999  
LR2
  100  
Hull 5004 - TBN STI Jermyn
DHSC
     (20 )     109,999  
LR2
  101  
Hull 5024 - TBN STI Lombard
DHSC
     (21 )     109,999  
LR2
  102  
HMD Handymax #1
HMD
     (18 )     38,000  
Handymax
  103  
HMD Handymax #2
HMD
     (18 )     38,000  
Handymax
  104  
HMD MR #1
HMD
     (18 )     52,000  
MR
  105  
HMD MR #2
HMD
     (18 )     52,000  
MR
                           
     
Total newbuilding product tankers DWT
               1,001,993    
                           
     
Total Fleet DWT
               6,778,556    

(1)
  
This vessel operates in or is expected to operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP is operated by Scorpio Commercial Management (SCM). SHTP and SCM are related parties to the Company.
(2)
  
This vessel operates in or is expected to operate in the Scorpio Panamax Tanker Pool (SPTP). SPTP is operated by SCM. SPTP is a related party to the Company.
(3)
  
This vessel operates in or is expected to operate in the Scorpio LR2 Pool (SLR2P). SLR2P is operated by SCM. SLR2P is a related party to the Company.
(4)
  
This vessel operates in or is expected to operate in the Scorpio MR Pool (SMRP). SMRP is operated by SCM. SMRP is a related party to the Company.
(5)
  
This vessel is on a time charter agreement for two years expiring in March 2016, which also contains a 50% profit sharing provision whereby we split all of the vessel's profits above the daily base rate with the charterer. 
(6)
  
This vessel is on a one-year time charter agreement that expires in September 2015. This agreement contains a 50% profit sharing provision whereby we split all of the vessel's profits above the daily base rate with the charterer. 
(7)
  
Redelivery from the charterer is plus or minus 30 days from the expiry date.
(8)
  
In April 2015, we declared an option to extend the charter for an additional year at $14,150 per day effective May 2015.
(9)
  
In April 2015, we declared an option to extend the charter for an additional year at $14,150 per day effective May 2015.
(10)
  
In September 2014, we declared an option to extend the charter for an additional year at $13,500 per day effective April 3, 2015.
(11)
  
We have two consecutive options to extend the charter for an additional six month and one year periods at $15,250 per day and $16,350 per day, respectively. 
(12)
  
In March 2015, we declared an option to extend the charter for an additional year at $15,200 per day effective May 2015.  We have an option to extend the charter for an additional year at $16,200 per day.
(13)
  
The rate for the first year of this agreement was $15,750 per day, the rate for the second year is $16,250 per day, and the rate for the third year is $16,750 per day. We have options to extend the charter for up to two consecutive one year periods at $17,500 per day and $18,000 per day, respectively. 
(14)
  
In May 2015, we declared an option to extend the charter for an additional year at $12,500 per day.  We have also entered into an agreement with the vessel's owner whereby we split all of the vessel's profits above the daily base rate.
(15)
  
We have an option to extend the charter for an additional year at $17,250 per day.
(16)
  
We have entered into an agreement with a third party whereby we split all of the vessel's profits and losses above or below the daily base rate.   We also have an option to extend the charter for an additional year at $22,600 per day. 
(17)
  
In April 2015, we extended the charter for an additional year at $24,875 per day effective September 2015.  We have an option to extend the charter for an additional year at $26,925 per day.
(18)
  
These newbuilding vessels are being constructed at HMD (Hyundai Mipo Dockyard Co. Ltd. of South Korea).  One vessel is expected to be delivered in the third quarter of 2015 and the remaining four vessels throughout 2017.
(19)
  
These newbuilding vessels are being constructed at SSME (Sungdong Shipbuilding & Marine Engineering Co., Ltd). Two vessels are expected to be delivered in the third quarter of 2015, one in the third quarter of 2016 and one in the fourth quarter of 2016.
(20)
  
These newbuilding vessels are being constructed at DHSC (Daehan Shipbuilding Co. Ltd). These two vessels are expected to be delivered in the first and second quarter of 2016.
(21)
  
This newbuilding vessel is being constructed at DHSC. This vessel is scheduled to be delivered in August 2015, whereupon the Company will bareboat charter-in the vessel for up to nine months and purchase the vessel at the conclusion of the bareboat charter.
     
 
 
 
19
 
 
 
Business Strategy, Dividend Policy, and Stock Buyback Program
 
Business Strategy
 
The Company's primary objectives are to profitably grow the business and emerge as a major operator of product tanker vessels. The Company intends to acquire modern, high-quality tankers through timely and selective acquisitions. The Company is currently concentrating on these sectors because of their attractive fundamentals which the Company believes includes:
 
 
·
increasing demand for refined products.
 
 
·
increasing ton miles (distance between production and areas of demand), and
 
 
·
reduced order book.
 
Dividend Policy
 
The declaration and payment of dividends is subject at all times to the discretion of the Company's Board of Directors. The timing and amount of dividends, if any, depends on the Company's earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in the loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors.
 
The Company's dividend history is as follows:
 
On July 29, 2015, the Scorpio Tankers' Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on September 4, 2015 to all shareholders as of August 14, 2015 (the record date). As of July 29, 2015 there were 182,592,121 shares outstanding.
 
       
Date paid
  
Dividends per share
  
June 2013
   $ 0.025  
September 2013
   $ 0.035  
December 2013
   $ 0.070  
March 2014
   $ 0.080  
June 2014
   $ 0.090  
September 2014
   $ 0.100  
December 2014
   $ 0.120  
March 2015
   $ 0.120  
June 2015
   $ 0.125  
         
 
 
 
20
 
 
 
Securities Buyback Program
 
In May 2015, the Company's Board of Directors authorized a new securities buyback program to purchase up to an aggregate of $250 million of the Company's common stock and bonds, which currently consist of its (i) Convertible Senior Notes Due 2019, which were issued in June 2014, (ii) Unsecured Senior Notes Due 2020 (NYSE: SBNA), which were issued in May 2014, and (iii) Unsecured Senior Notes Due 2017 (NYSE: SBNB), which were issued in October 2014. This program replaces the Company's stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program.
 
During 2015 (through the date of this press release), the Company has acquired the following:
 
 
·
an aggregate of 1,016,988 of its common shares that are being held as treasury shares at an average price of $8.46 per share. There are 182,592,121 shares outstanding as of July 29, 2015.
 
 
·
$1.5 million face value of its Convertible Senior Notes Due 2019 at an average price of $1,088.10 per $1,000 principal amount. 
 
The Company has $245.6 million remaining under its securities buyback program as of the date of this press release. The Company expects to repurchase any securities in the open market, at times and prices that are considered to be appropriate by the Company, but is not obligated under the terms of the program to repurchase any securities.
 
About Scorpio Tankers Inc.
 
Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. Scorpio Tankers Inc. currently owns 76 tankers (16 LR2 tankers, 15 Handymax tankers, and 45 MR tankers) with an average age of 1.0 years, and time charters-in 17 product tankers (four LR2, four LR1, four MR and five Handymax tankers). The Company has reached an agreement to acquire an MR product tanker in August 2015 and has contracted for 12 newbuilding product tankers (two Handymax, three MR and seven LR2), four of which are expected to be delivered in the third quarter of 2015, four throughout 2016 and four throughout 2017. Additional information about the Company is available at the Company's website www.scorpiotankers.com, which is not a part of this press release.
 
Non-GAAP Measures
 
This press release describes adjusted net income and adjusted EBITDA, which are not measures prepared in accordance with IFRS (i.e. "Non-GAAP" measure). The Non-GAAP measures are presented in this press release as we believe that they provide investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with IFRS.
 
Adjusted net income
   
   
For the three months ended June 30, 2015
  
In thousands of U.S. dollars except per share and share data
  
Amount
    
Per share
basic
    
Per share
diluted
  
Net income
  
$
57,588
    
$
0.35
    
$
0.32
  
Adjustments:
                        
Unrealized gain on derivative financial instruments
    
(64
)
    
(0.00
)
    
(0.00
)
Gain on sale of vessels
    
(11
)
    
(0.00
)
    
(0.00
)
Total adjustments
    
(75
)
    
(0.00
)
    
(0.00
)
Adjusted net income
  
$
57,513
    
$
0.35
    
$
0.32
  
 
   
For the three months ended June 30, 2014
  
   
Amount
    
Per share
basic
    
Per share
diluted
  
Net loss
  
$
(574
)
  
$
(0.00
)
  
$
(0.00
)
Adjustments:
                        
Deferred financing fees write-off - STI Spirit
    
317
      
0.00
      
0.00
  
Unrealized gain on derivative financial instruments
    
(65
)
    
(0.00
)
    
(0.00
)
Gain on sale of Dorian shares
    
(10,924
)
    
(0.06
)
    
(0.06
)
Total adjustments
    
(10,672
)
    
(0.06
)
    
(0.06
)
Adjusted net loss
  
$
(11,246
)
  
$
(0.06
)
  
$
(0.06
)
                         
 
 
 
21
 
 
 
    For the six months ended June 30, 2015  
   
Amount
    
Per share
basic
    
Per share
diluted
  
Net income
  
$
98,283
    
$
0.63
    
$
0.56
  
Adjustments:
                        
Unrealized loss on derivative financial instruments
    
542
      
0.00
      
0.00
  
Gain on sale of vessels
    
(2,019
)
    
(0.01
)
    
(0.01
)
Total adjustments
    
(1,477
)
    
(0.01
)
    
(0.01
)
Adjusted net income
  
$
96,806
    
$
0.62
    
$
0.55
  
 
   
For the six months ended June 30, 2014
  
   
Amount
    
Per share
basic
    
Per share
diluted
  
Net income
  
$
52,764
    
$
0.28
    
$
0.28
  
Adjustments:
                        
Deferred financing fees write-off - STI Spirit
    
317
      
0.00
      
0.00
  
Unrealized gain on derivative financial instruments
    
(112
)
    
(0.00
)
    
(0.00
)
Gain on sale of VLCCs
    
(51,419
)
    
(0.27
)
    
(0.27
)
Gain on sale of Dorian shares
    
(10,924
)
    
(0.06
)
    
(0.06
)
Total adjustments
    
(62,138
)
    
(0.33
)
    
(0.33
)
Adjusted net loss
  
$
(9,374
)
  
$
(0.05
)
  
$
(0.05
)
 
 
 
22
 
 
 
   
Adjusted EBITDA
  
   
   
For the three months ended June 30,
    
For the six months ended June 30,
  
In thousands of U.S. dollars
  
2015
    
2014
    
2015
    
2014
  
Net (loss) / income
  
$
57,588
    
$
(574
)
  
$
98,283
    
$
52,764
  
Financial expenses
    
21,840
      
472
      
39,898
      
871
  
Unrealized (gain) / loss on derivative financial instruments
    
(64
)
    
(65
)
    
542
      
(112
)
Financial income
    
(53
)
    
(42
)
    
(78
)
    
(69
)
Depreciation
    
25,550
      
7,369
      
46,958
      
13,322
  
Depreciation component of our net profit from associate
    
-
      
599
      
-
      
1,343
  
Amortization of restricted stock
    
7,464
      
7,481
      
15,140
      
14,436
  
Gain on sale of VLCCs
    
-
      
-
      
-
      
(51,419
)
Gain on sale of Dorian shares
    
-
      
(10,924
)
    
-
      
(10,924
)
Gain on sale of vessels
    
(11
)
    
-
      
(2,019
)
    
-
  
Adjusted EBITDA
  
$
112,314
    
$
4,316
    
$
198,724
    
$
20,212
  
 
 
23
 
 
 
Forward-Looking Statements
 
Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements.
 
The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
 
In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.
 
Scorpio Tankers
212-542-1616
 
24

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