Scorpio Tankers Inc. Q3-20 Earnings Conference Call - November 5, 2020
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Scorpio Tankers Inc. Q3-20 Earnings Conference Call November 5, 2020
Disclaimer and Forward-looking Statements
This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking
statements reflect Scorpio Tankers Inc.’s (“Scorpio’s”) current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,”
“potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements. The forward-looking statements in this presentation are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in Scorpio’s records and other data available from third parties.
Although Scorpio believes 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 Scorpio’s control, Scorpio cannot assure you that it will achieve or accomplish these expectations, beliefs, projections or future financial performance.
Risks and uncertainties include, but are not limited to, the failure of counterparties to fully perform their contracts with Scorpio, the strength of world economies and currencies, general market conditions,
including fluctuations in charter hire rates and vessel values, changes in demand in the tanker vessel markets, changes in Scorpio’s operating expenses, including bunker prices, drydocking and insurance
costs, the fuel efficiency of our vessels, the market for Scorpio's vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in
such financing arrangements, changes in governmental and environmental rules and regulations or actions taken by regulatory authorities including those that may limit the commercial useful lives of tankers,
potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors
described from time to time in the reports Scorpio files with, or furnishes to, the Securities and Exchange Commission, or the Commission, and the New York Stock Exchange, or NYSE. Scorpio undertakes no
obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of Scorpio's future performance, and actual results and future developments may vary
materially from those projected in the forward-looking statements
This presentation describes time charter equivalent revenue, or TCE revenue, which is not a measure prepared in accordance with IFRS (i.e. a "Non-IFRS" measure). TCE revenue is presented here because
we believe that it provides investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. This Non-IFRS measure should not be
considered in isolation from, as a substitute for, or superior to financial measures prepared in accordance with IFRS.
The Company believes that the presentation of TCE revenue is useful to investors because it facilitates the comparability and the evaluation of companies in the Company’s industry. In addition, the Company
believes that TCE revenue is useful in evaluating its operating performance compared to that of other companies in the Company’s industry. The Company’s definition of TCE revenue may not be the same as
reported by other companies in the shipping industry or other industries. See appendix for a reconciliation of TCE revenue to revenue, please see the Appendix of this presentation.
Unless otherwise indicated, information contained in this presentation concerning Scorpio’s industry and the market in which it operates, including its general expectations about its industry, market position,
market opportunity and market size, is based on data from various sources including internal data and estimates as well as third party sources widely available to the public such as independent industry
publications, government publications, reports by market research firms or other published independent sources. Internal data and estimates are based upon this information as well as information obtained
from trade and business organizations and other contacts in the markets in which Scorpio operates and management’s understanding of industry conditions. This information, data and estimates involve a
number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed above. You are cautioned not to give undue weight
to such information, data and estimates. While Scorpio believes the market and industry information included in this presentation to be generally reliable, it has not independently verified any third-party
information or verified that more recent information is not available.
2Quarterly Highlights
• Fleet average daily TCE(1) of $15,100/day
Quarterly Financial Results • Net loss of $20.2 million
• Adjusted EBITDA(1) of $82.1 million
$297 million in Debt
Repayments over Last 12 • For the period October 1, 2019 and September 30, 2020 the Company repaid $297 million in debt (see slide 8)
Months
• The Company has committed financing to increase liquidity by approximately $63.9 million, which includes:
• $47.1 million from the refinancing of eight vessels (after the repayment of debt).
• $16.8 million from the drawdown of financing for scrubbers that have been previously paid for and installed (i.e. there are no additional
payments needed in order to drawdown these funds)
Available Liquidity • These funds will be drawn down in coming weeks
• The Company is in discussions with financial institutions to further increase liquidity up to $75 million from the refinancing of 11 vessels.
• In addition to the above, the Company has $44.2 million of additional liquidity available (after the repayment of existing debt) from previously
announced financings that have been committed. These drawdowns are expected to occur at varying points in the future as several of these
financings are tied to scrubber installations on the Company’s vessels
• Between July 1, 2020 and September 7, 2020, the Company repurchased $52.3 million face value of its Convertible Notes due 2022 at an
Repurchase of Convertible average price of $894.12 per $1,000 principal amount, or $46.7 million.
Notes & Repayment of
Unsecured Notes • In September 2020, the Company acquired an aggregate of 1,170,000 of its common shares at an average price of $11.18 per share for a total
of $13.1 million.
Total Liquidity • As of November 5, 2020, the Company had total liquidity of approximately $209.7 million
(1) See Scorpio Tankers’ August 6, 2020 Earnings Press Release for definition 3Spot Rates Continued Trend of Quarterly Outperformance in Q3-2020
• Since Q4-18, year over year quarterly Company TCE rates have been higher every quarter, suggesting that the underlying supply and
demand drivers in our market have continued to tighten
Scorpio Average Fleet TCE ($/day)
FY-18 FY-19 FY-20
$35,000
$29,693
$30,000
$25,000
$22,644
$19,910
$20,000 $18,570
$15,100 $15,008
$15,000 $14,348
$13,331 $13,560
$12,301
$10,519
$10,000
$5,000
$0
Q1 Q2 Q3 Q4
4Q4-20 Company TCE Guidance
% of Q4 Days Booked as of November 5, 2020
LR2 LR1 MR HM
Q4-20 51% 63% 48% 47%
Average Daily TCE Revenue by Vessel Class ($/day)
$18,250
$12,500
$11,000
$8,500
LR2 LR1 MR HM
5Financial Performance
Revenue Adjusted EBITDA
Millions $USD Millions $USD
$400 $300
$346.2
$350 $252.0
$250
$300
$254.2
$250 $221.6 $200
$158.7
$200 $177.3 $150 $124.4
$150 $136.1
$100 $82.1
$100 $54.5
$50
$50
$0 $0
Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20
Net Income Net Debt
Millions $USD Millions $USD
$200 $3,200
$143.9
$150 $3,100
$3,100
$100
$3,000 $2,969
$46.6 $2,950
$50 $2,921
$12.0 $2,890
$2,900
$0
($50) $(20.2) $2,800
$(45.3)
($100) $2,700
Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20
6Limited Capex & No Major Upcoming Debt Maturities
• Since 2018, the Company completed $386.4 million in capex payments for drydock, ballast water treatment systems and scrubbers
• Remaining capex for FY-20 and FY-21 is $57.6 million
• The Company has $61 million of committed scrubber financing that has yet to be drawn
Company CapEx (Drydock, BWTS & Scrubber Installations) Quarterly Debt Amortization Payments
$100
$250
$204.0 $78.3
$80
$200 $72.7 $73.2 $73.3
$68.8
$173.0
$17.3 $60 33.1
$150
$40
$100 $204.0 $72.7 $73.2 $73.3
$68.8
$155.7
$49.0 $45.2
$20
$50 $40.3
$26.7
$40.3 $49.0
$26.7
$0 $0
FY-18 FY-19 FY-20* FY-21* FY-22* Q4-20 Q1-21 Q2-21 Q3-21 Q4-21
Payments Made Remaining Payments Payments Made through November 4, 2020 Scheduled Principal Repayments
7Summary of Debt Drawdowns, Repayments and Issuance
• From the period October 1, 2019 and September 1, Summary of Debt Drawdowns, Repayments and Issuance
2020 the Company repaid $297 million in debt,
including: From October 1, 2019 through September 30, 2019 Amount (USD$ Millions)
• $53.8 million of unsecured notes repaid in May
2020 Outstanding debt October 1, 2019 $ 3,193,994
• $52.3 million of the Company’s convertible Leasehold interest in four Trafigura vessels 138,800
notes due May 2022
• $191.0 million of debt amortization payments Drawdowns on scrubber finance 44,700
May 2020 unsecured notes issuance 28,100
May 2020 unsecured notes redemption (53,750)
Repurchase of convertible notes (52,300)
Debt repayments, net (190,950)
Outstanding debt September 30, 2020 $ 3,108,594
Debt repayments, net is the debt amortization payments less any drawdowns from vessel refinancing's
Leasehold interest in four Trafigura newbuild vessels, which delivered in 2020, and are apart of the $670 million lease financing or #29 in the debt table of the Q3-20 earnings release 8Short Term Market Update
Refined Product Floating Storage (million barrels) (1)
• The benefit of above average TCE rates in the third quarter has
resulted in a lower start to the fourth quarter in 2020 120 107.3
• Despite a significant recovery in oil demand since April,
global
100
80
78.7
demand continues to balance its recovery with the impact of the 67.8
pandemic 60 50.1
39.0 36.9
• Significant refinery maintenance in September (9.9 mb/d) and 40
20
22.9
October (9.1 mb/d) and shutdowns in the US Gulf due to hurricanes 3.3 5.1
resulted in lower seaborne exports 0
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
• Floating storage and land based inventories continue to decline
• Floating storage inventories down from 107.3 million barrels in USG (PADD 3) Product Inventories (million barrels) (2)
May to 36.9 million barrels in October Gasoline Diesel Jet
• USG gasoline, diesel and jet inventories have declined by 200
180 162.8 166.6 166.4
158.9
23.3 million barrels since July 160
155.4 153.4
141.4
155.3
16.3 16.2 15.2 143.3
14.1 15.0 137.3 13.3 13.3
• Rates are expected to improve given the season winter uptick from
140 10.8 11.9
13.0
120 47.2 47.0 52.2 55.6 60.0 61.4 60.8
42.1 44.9 51.4
100
heating oil demand, wide NW Europe-Far East naphtha arb and
80
conclusion of refinery maintenance 60
40 94.1 91.4 82.2 85.8 89.8 91.0 90.4 89.9 84.8 80.0
20
-
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1) Clarksons Shipping Intelligence November, 2020
2) EIA, November 2020 9Long Term Fundamentals
Oil and Refined Product Demand Expected to Continue to Recover through 2021
• Oil demand expected to continue to recover and the IEA expects oil demand to increase 5.5 mb/d in 2021 to 97.2 mb/d (1)
• Seaborne refined product exports and ton mile demand are estimated to increase 6.1% and 7% in 2021, respectively (2)
Refining Capacity Closures & Expansions Expected to Increase Product Exports & Ton Miles
• Older and less efficient refineries face a wave of closures due to weak refining margins, tightening environmental rules and overseas competition, prompting
some owners to opt to converting to import terminals or biofuels production
• At the same time, over 1 million barrels of complex refining capacity will come online in the Middle East in the next few months
Limited Newbuilding Orders & Aging Fleet Extends Limited Fleet Growth
• Limited newbuilding orders have kept the current orderbook near all-time lows
• Including newbuilding deliveries, a significant portion of the product tanker fleet will turn 15 years old over the next three years
Environmental Regulations to Benefit Modern Vessels
• The EU has put pressure on the IMO to accelerate it’s 2030 GHG emission targets and may implement its own ETS system by 2023
• While it’s unclear how the timeline of these plans will accelerate, the focus on reducing GHG emissions in the shipping sector is clear and modern fuel
efficient vessels will be in the best position to benefit from increasing regulation
1) IEA Oil Market Report, October 2020
2) Clarksons Shipping Intelligence November, 2020 10Demand Has Continued to Improve Since April
• Global diesel and gasoline demand has made a significant Global Diesel Demand (mb/d) (1)
35
recovery since April 2020, increasing 4.9 mb/d and 7.6 mb/d, 29.5 29.3 28.2 28.6
30 27.2 27.2 27.1 27.7 27.7 27.9
26.4
respectively 23.7 25.1
25
• While jet fuel demand has lagged in it’s recovery, demand has 20
15
increase 73% since April
10
• Asia has led the demand recovery, specifically China where 5
-
gasoline and diesel is demand is estimated to have increased
Jan-20
Mar-20
Jun-20
Jul-20
Feb-20
Nov-19
Dec-19
Aug-20
Sep-20
Oct-19
Apr-20
May-20
Oct-20
year over year in October
North America Latin America Europe FSU Middle East Africa Asia
Global Jet Demand (mb/d) (1) Global Gasoline Demand (mb/d) (1)
10 30 26.0 26.5 26.0 24.9 25.0 25.2 24.9 25.2
8.3 24.5 24.5
8.0 8.0 8.0 25 21.9
8 7.3 21.0
20 17.5
6 5.5
15
4.5 4.8
4.1 4.3
3.5 10
4 3.1
2.8
5
2 -
Jan-20
Jun-20
Jul-20
Feb-20
Mar-20
Nov-19
Dec-19
Aug-20
Sep-20
Oct-19
Oct-20
Apr-20
May-20
--
Jan-20
Jun-20
Jul-20
Feb-20
Mar-20
Nov-19
Dec-19
Aug-20
Sep-20
Oct-19
Apr-20
May-20
Oct-20
North America Latin America Europe FSU Middle East Africa Asia
1) Energy Aspects, November 2020 11Global Refinery Closures Accelerate
• Oil refineries face a wave of closures due to weak refining margins, Announced Refinery Closures
tightening environmental rules and overseas competition, prompting
some owners to opt for closure or converting plants for storage or Operator Location Capacity (kbd) Timing
biofuels production MPC Martinez, California 161 2020
MPC Gallup, NM (USA) 26 2020
• Most of these refineries are scheduled to close at the end of the PBF Paulsboro, NJ (USA) 170 2020
year and early next year HFC Cheyenne, WY (USA) 52 2020
• After closing, the lost production in these regions is likely to be North Atlantic Come by Chance, Canada 135 2021
replaced through imports Total Granpuits, France 101 2021
Shell Tabangao, Philippines 110 2020
• At the same time, the Middle East is adding over 1 million barrels of Refining NZ Marsden Point, New Zealand 40 2021
complex and export oriented refining capacity BP Kwinana Beach, Australia 140 2020
• Q4-20 – Jazan refinery in Saudi Arabia, 400 kbd Cosmo Oil Osaka, Japan 115 2021
• Q1-21 - Al Zhour refinery in Kuwait with 615 kbd
• The combination of refinery closures and additions is expected to
increase seaborne volumes of refined products and ton miles
12Orderbook as % of Fleet Remains Near Historical Low
• Limited newbuilding orders coupled with a low orderbook has kept orderbook as % of fleet near historical low
Newbuilding Orders Orderbook as % of Fleet
MR LR1 LR2 25.0%
Product Tanker 10K+ Orderbook % Fleet
450 433
5 Yr Avg
400 78 10 Yr Avg
20.0%
350
67
300
255
(# of Vessels)
250 15.0%
62
200 185 179 179 188
21 15 21
25 152
150 42
51 53 24 288 34 118 10.0%
106 112 111 105
95
100 10 11 11 10 193 35 36 80 83
17 33 17 17
64 62 6.9%
57
130 25 15 1 60
113 111 125 15 2
50 10 92 20
79 68 83 28 14 83 22 77 0
1 58 53 59 68
44 14 35 2
3 40 5.0%
13 17
0
Source: Clarksons Research Intelligence, November 2020 13Significant % of the Fleet Turning 15 Years & Older
• Including the newbuilding orderbook, a significant % the product tanker fleet will turn 15 years and older during the next three years
Fleet Age Profile Today vs 2023 (Including Newbuilding Orders)
% of fleet 15 years old & older (Today) % of fleet 15 years old & older (2023)
80%
69%
70%
60%
51%
50% 46%
40%
40%
30% 28%
22% 23%
20%
14%
10%
0%
HM MR LR1 LR2
Source: Clarksons Research Intelligence, November 2020 14Increasing Environmental Regulations to Benefit Modern Vessels
• The EU has put pressure on the IMO to accelerate it’s 2030 GHG emission targets and implement and may implement its own ETS system by 2023
• It’s unclear how the timeline of these plans will accelerate, but the focus on reducing GHG emissions in the shipping sector is clear
• Modern fuel-efficient vessels will benefit given their lower GHG emissions while older less efficient vessels may undergo retrofits or be scrapped
• Scorpio is well positioned for future regulation as it operates the largest and youngest fleet of scale with an average age of 4.9 years
Largest & Most Modern Product Tanker Fleet Average Age vs. Worldwide Fleet
HM MR LR1 Total Average Age 16
150 14.5
135 Scorpio Tankers Active Fleet
14
120
42 12 11.3
10.5
90 10 9.3
90 12 6
73 7.5
8
30 10 64
60 55
9 13 50 6
47
63 11 4.8 4.5 4.7
13 7
11 4
30 43
52 44 24
33
33 2
18 10.6 10.3 11.9 9.4 12.1
6
11 8.6
16
4.9
0 2
Scorpio BW/Hafnia TORM COSCO SCF Group Diamond S A.P. Moller 0
Handymax MR LR1 LR2
Source: Clarksons Shipping Intelligence November, 2020
Note: Figures do not include newbuild vessels on order. 15www.scorpiotankers.com
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