1 Scorpio Tankers, Inc. Q1 2013 Conference Call April 29, 2013
Disclaimer COMPANY OVERVIEW 2 This presentation contains certain statements that may be deemed to be forward-looking statements within the meaning of applicable federal securities laws. All statements, other than statements of historical facts, that address activities, events or developments that Scorpio Tankers Inc. ( Scorpio Tankers or the Company ) expects, projects, believes or anticipates will or may occur in the future, including, without limitation, acquisitions of vessels, the outlook for fleet utilization and shipping rates, general industry conditions, future operating results of the Company s vessels, capital expenditures, expansion and growth opportunities, business strategy, ability to pay dividends and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this presentation are based on reasonable assumptions, actual results may differ from those projected in the forwardlooking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the risk factors described in the Company s registration statement filed with the Securities and Exchange Commission (the SEC ) related to this offering. This presentation is for informational purposes only and does not constitute an offer to sell securities of the Company. Before you invest, you should read the prospectus and other documents the issuer has filed with the SEC for more complete information about the Company. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov.
SCORPIO S NEWEST VESSELS OUTPERFORM 3 For Q1, STNG reported MR Time Charter Equivalent results of $20,726/ day for owned vessels and $16,453/ day for time-chartered in vessels. In addition, for vessels employed in the Scorpio MR Tanker Pool, These vessels: Year Built Shipyard Out-earned these vessels: Year Built Shipyard 2004 STX 2007 SLS 2007 STX 2007 3 Maj 2007 3 Maj 2007 3 Maj 2007 SPP 2009 HMD 2012 GSI 2012 GSI 2013 HMD 1 By more than $3,900/ day
WHAT DOES THE RAW DATA ON FUEL EFFICIENCY LOOK LIKE? 4 I. Fuel Consumption data is Noisy! a) Weather, current, sea state, depth of water b) Quality and properties of the fuel c) Condition of the vessel (ballast, laden, hull or propeller fouling?) II. Data is verified! Time charterers and pools own a vessel s fuel, which means consumptions, weather conditions, and actual fuel quality are all subject to independent surveys and third party verification.
THIRD PARTY VESSEL PERFORMANCE 5 This is an excerpt of a performance report for a third party vessel on a short time-charter: Year Built Shipyard 2004 STX 2007 SLS 2007 STX 2007 3 Maj 2007 3 Maj 2007 3 Maj 2007 SPP 2009 HMD 2012 GSI 2012 GSI 2013 HMD Net of 3 tonnes per day for auxiliaries (typical for all MRs), the vessel consumes over 26 tonnes per day of fuel at 12.25 knots, laden and in good weather.
NEW VESSEL PERFORMANCE 6 This is an excerpt of a performance report for STI Amber, also delivered during 2012 and undertaking a similar short time charter: Year Built Shipyard Net of 3 tonnes per day for auxiliaries, the vessel consumes less than 20.5 tonnes per day of fuel at 13.5 knots, laden and in good weather.
THE ECONOMICS OF FUEL EFFICIENCY ON THE SPOT MARKET 7 TC2 (1) A Benchmark Voyage for a MR Product Tanker: World Scale 160 (3) ; Flat Rate $16.30; 37,000 mt of Gasoline & Fixed Differentials (2) (1.6 x $16.3 x 37,000 + $40,189 (2) ) Loading in Rotterdam for 2 Days (Consuming MGO) Steaming 13.5 Knots, Rotterdam to NYC in Laden (Consuming HSFO and LSFO for 9.04 and 1.92 days respectively) Discharging in NYC for 2 Days (Consuming LSFO) Steaming 12 Knots, NYC to Rotterdam in Ballast + (Consuming HSFO and LSFO for 10.17 and 2.16 days respectively) Gross Freight (3) Port Expenses (3) Cost of Bunkers (3) WS 160 (160%= 1.6) 1.6 Port Cost Specification $/MT Flat Rate $16.30 Rotterdam $52,764 HSFO $570 Metric Tons (mt) 37,000 New York $30,000 LSFO $578 Fixed Differentials (2) $40,189 Total Port Expenses $82,764 MGO $813 Gross Freight= $1,005,149 Footnotes: (1) All figures approximate & voyage is theoretical. Same assumptions Clarksons Research Services uses. (2) Fixed Differentials of $40,189 (World Scale 2013) (3) Clarksons Shipping Intelligence Weekly, April 19, 2013
TC2 VOYAGE COMPARISON (1) 8 STI Garnet Vessel A (4) Eco Premium Yard/ Year of Construction HMD 2012 SLS 2007 $ % Gross Freight (WS 160 (3) x 37,000 x $16.3 + Fixed Differentials (2) ) $1,005,149 $1,005,149 Less: Broker Commissions $25,129 $25,129 Port Expenses (~$53K Rotterdam, $30K New York) $82,764 $82,764 Bunker Expenses $284,018 $376,248 ($92,230) 25% Voyage Earnings $613,239 $521,008 $92,230 18% Time Charter Equivalent ($/ Day) $22,465 $19,086 $3,379 18% Footnotes: (1) All figures approximate & voyage is theoretical. Same assumptions Clarksons Research Services uses. (2) Fixed Differentials of $40,189 (World Scale 2013) (3) Clarksons Shipping Intelligence Weekly, April 19, 2013 (4) Modern MR vessel operating in the Scorpio MR Pool.
FUEL SAVINGS CALCULATION ( 1) 9 (A) (B).(C). =(A x B x C) Consumption Knots Hours Days MT / Day (@ 13 Knots) Bunker Price Estimated Bunker Cost Nautical Miles + (5% Sea Margin) Speed Duration Duration STI Garnet Vessel A $/ MT STI Garnet (1) Vessel A (2) Savings Leg Durations & Fuel Days Rot Load (MGO) 2.00 48 2.0 5.5 5.5 $813 $8,938 $8,938 $0 Rot-->NYC Laden ECA (LSFO) 1.92 623 13.5 46 1.9 24.7 31.3 $578 $27,436 $34,767 $7,331 Rot-->NYC Laden (HSFO) 9.04 2,930 13.5 217 9.0 24.7 31.3 $570 $127,298 $161,312 $34,015 NYC Discharge (LSFO) 2.00 48 2.0 9.0 14.0 $578 $10,404 $16,184 $5,780 NYC-->Rot Ballast (HSFO) 10.17 2,930 12 244 10.2 15.6 22.0 $570 $90,448 $127,555 $37,107 NYC-->Rot Ballast ECA (LSFO) 2.16 623 12 52 2.2 15.6 22.0 $578 $19,494 $27,492 $7,998 Total Days 27.30 Total Savings= $92,230 $3,379/ day difference in TCE (1) All figures approximate & voyage is theoretical. Same assumptions Clarksons Research Services uses. (2) Modern MR vessel operating in the Scorpio MR Pool.
WHAT ABOUT A DIFFERENT BASELINE? 10 Clarksons Publishes MR Routes and Earnings each week The Clarksons MR is a 5-year old vessel which steams laden at 13.5 knots on 30 tonnes per day laden and steams in ballast at 12 knots on 25 tonnes per day MR TCE $/ day TCE Premium Clarkson MR Route (2) Clarksons MR (2) Scorpio MR (1) $/ day % UKC - USAC $18,631 $22,465 $3,834 21% UKC - WSAC - USG UKC $18,841 $22,004 $3,163 17% UKC - W. Africa $21,673 $25,573 $3,900 18% USG ECSA $16,010 $19,966 $3,956 25% Singapore - E. Aus. $17,443 $21,596 $4,153 24% Singapore Japan $22,143 $25,397 $3,254 15% WC India Japan $13,213 $17,099 $3,886 29% Gulf - E. Africa $19,473 $23,430 $3,957 20% Gulf - UKC $13,044 $16,916 $3,872 30% (1) All figures approximate & voyage is theoretical. Same assumptions Clarksons Research Services uses. (2) Clarksons Shipping Intelligence Weekly, April 19, 2013
HOW SHOULD ONE THINK ABOUT THIS FUEL EFFICIENCY SPREAD? 11 Observation #1: For refiners, Bunkers (otherwise known as resid or HFO or 380 cst ) is a relatively unattractive product for refiners: 40.00 Simple Refining Margins Crack Spread ($/ Barrel) 30.00 20.00 10.00 0.00-10.00-20.00-30.00 RBOB ULSD USG Houston 380cs Source: Bloomberg
OBSERVATIONS - SULFUR LIMITS 12 Observation #2: Regulations pertaining to sulfur are significant, and sulfur limits in fuels are falling in an uneven manner around the world: At its 58th session in London in October 2008, the Marine Environment Protection Committee (MEPC) of the International Maritime Organization (IMO) unanimously adopted amendments to the MARPOL Annex VI regulations to introduce more stringent emission standards and fuel sulfur requirements for ships. The main changes to MARPOL Annex VI will see a progressive reduction in sulfur oxide (SOx) emissions from ships, with the global sulfur cap reduced initially to 3.50% (from the current 4.50%), effective from 1 January 2012; then progressively to 0.50%, effective from 1 January 2020, subject to a feasibility review to be completed no later than 2018. The limits applicable in Sulfur Emission Control Areas (SECAs) will be reduced to 1.00% from 1 July 2010 (from the current 1.50%); being further reduced to 0.10% effective 1 January 2015 The revised Annex VI will allow for an Emission Control Area to be designated for Sox, Particulate Matter, or NOx, or all three types of emissions from ships, subject to a proposal from a Party to the Annex, which would be considered for adoption by the IMO, if supported by a demonstrated need to prevent, reduce and control one or all three of those emissions from ships Source: IMO, DNV
OBSERVATIONS EMISSION CONTROL AREAS 13 North America Coasts ECA-SOx August-12, MAX 1% US Caribbean ECA-SOx from Jan-14 North America & US Caribbean ECA s will also be ECA- NOx from 2016 In 2015, W. Coast Norway, might be.1% MAX SOx Europe Marine Gas OIL (MGO) Required at Berth MGO Required 24 miles from coast and at Berth (California) ECA Sulfur Limits MAX SOx Global Sulfur Cap MAX SOx As of July 2010 1.00% As of January 1, 2012 3.50% As of January 1, 2015 0.10% As of January 1, 2020 0.50% Source: IMO, DNV
OBSERVATIONS CONT D 14 Observation #3: sulfur regulations are a significant tax on shipping! Sulfur is expensive (and risky) for refiners to remove! Sulfur is a natural lubricant! Marine fuels are difficult to transport and store (both ashore and on ships). As refining capacity shifts, the supply chain for fuel lengthens and bottlenecks appear Marine Gas Oil ( MGO ) is a substitute to Bunkers, but it is priced at typical premium of $250-$350/ tonne over HFO Observation #4: We don t think the price of bunkers can drop in lock-step with a collapse in the price of the barrel (and isn t there plenty of crude in the world right now?) 1 0.9 6M Trailing Correlation of 380 cst Rotterdam against Brent Correlation 0.8 0.7 0.6 0.5 0.4 Trailing Correlation (Actual Prices) Jan-09 Mar-09 May-09 Jul-09 Sep-09 Dec-09 Feb-10 Apr-10 Jul-10 Sep-10 Nov-10 Jan-11 Apr-11 Jun-11 Aug-11 Nov-11 Jan-12 Mar-12 May-12 Aug-12 Oct-12 Dec-12 Mar-13 Source: Bloomberg
SOME TYPICAL COMMENTS 15 I. The Data Set is Small It is noisy, but for us it is not small! II. The vessels are underpowered Really??? Let s go back to high school physics III. Slow-steaming negates the benefits of fuel-efficient design Absolutely! And everybody saves fuel if they simply stop their ships! IV. It all looks good on paper Ship designs and talk are CHEAP quality shipbuilding, quality commercial and operational execution, and YOUR equity are DEAR
SUMMARY 16 In summary, there are several advantages to a new fuel-efficient product tanker: a) Revenue benefits ($3,000/ day?, $4,000/ day?, more?) b) Cost benefits (Lower operating expenses, estimated at $500-$750/ day) c) Intangible benefits (Market preferences for a greener vessel) STNG is gets all three every day in a market where CASH is KING
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