Scorpio Tankers Inc. Q2 FY2025 earnings call

Financial Strength - Generated strong adjusted EBITDA and net income. - Fortified balance sheet by expanding revolving credit capacity, maintaining a cash breakeven of $12,500 per day, and reducing lease obligations from $2.2 billion in 2022 to below $70 million. - Liquidity stands at approximately $1.4 billion including cash, undrawn credit, and DHT investment. ### Operational - Completed dry docks for 8 vessels in Q2, with 71 vessels dry docked over the last 7 quarters, enhancing fleet efficiency. ### Commercial - Added 1 vessel on a 12-year bareboat charter with a time charter equivalent rate exceeding $21,000 per day. - Sold 2.7 million shares of DHT at over $12 per share, realizing a 16% return. ### Market Outlook - Product tanker market benefits from strong demand for refined products and long-term structural changes in global refining extending trade routes and increasing ton miles. - OPEC's recent production increase provides a tailwind to tanker demand.

In the second quarter, Scorpio Tankers generated $144.5 million in adjusted EBITDA and $67.8 million in adjusted net income. Operating cash flow excluding working capital changes was over $130 million for the quarter and approximately $240 million year-to-date. Liquidity is approximately $1.4 billion, including cash, undrawn revolving credit, and investment in DHT. Net debt has declined $2.5 billion to $438 million as of July 30, 2025. Adjusted net income was $67.8 million or $1.41 per diluted share. The product tanker market benefits from strong demand for refined products and long-term structural changes in global refining, contributing to revenue.

Forward-Looking - Positive outlook on product tanker market due to strong demand, low global inventories, and refining shifts. - OPEC production increase expected to support tanker demand, with positive view on crude and refined products. - Company's strong liquidity and balance sheet position it well to navigate uncertainty and deliver long-term value to shareholders. - Caution remains due to policy uncertainty and geopolitical risks clouding visibility.

Geopolitical Risks - Trade policy, tariffs, and geopolitical instability create uncertainty. - Red Sea Houthi attacks and ongoing Ukraine conflict impact market visibility. ### Sanctions - EU sanctions on Russia, including lowering crude price cap and banning imports of products from refined Russian oil, posing challenges for vessels operating in Russian trades. ### Transition Uncertainty - Uncertainty around transition to new fuels and technologies for vessels, with caution on premature adoption of unproven technologies.

Q: John Chappell from Evercore ISI asks what could make quarter-to-date numbers higher or lower.

A: James Doyle states European sanctions have transition periods, OPEC barrels expected in September, but it's a seasonally slower period; Robert Bugbee adds OPEC impact on Q3 may be limited but structural factors can lead to stronger Q4.

Q: Omar Nokta from Clarksons Platou Securities asks about capital allocation and fleet rejuvenation.

A: Robert Bugbee says nothing is on the cards near term, but company monitors S&P and new building markets.

Q: Greg Lewis from BTIG asks about TSP program.

A: Cameron Mackey mentions TSP renewal risk is low as funding has always been renewed, and expects bareboat to run full 12 years.

Q: Tim Chang from Bank of America asks about vessel OpEx.

A: Christopher Avella says OpEx has stepped down and advises using trailing 4-quarter average.

Q: Chris Robertson from Deutsche Bank asks about OpEx efficiencies post surveys.

A: Christopher Avella and Cameron Mackey explain OpEx benefits from dry docks but natural wear and tear will cause costs to reset over time.

Q: Liam Burke from B. Riley Securities asks about carbon capture system and refinery redistribution.

A: Cameron Mackey says carbon capture is a low-cost pilot; James Doyle states refinery redistribution continues with net capacity growth and older refineries closing.

Q: Frode Morkedal from Clarksons Securities asks about oil demand and ship values.

A: Emanuele Lauro says oil demand is stronger than expected, and ship values are adjusting upwards due to market factors and refinery shifts.