Have there been pockets of hoarding or new/expanding trade routes due to the conflict and war in Iran, and how is this translating into operations?

There have been genuinely unique voyages and elongated ton-miles, particularly with increased U.S. Gulf Coast exports. The price of freight has become insignificant compared to the value of oil, so freight curtailment is not an issue. The company consciously moved ships west to benefit from stronger market movements. “The fact is that the price of oil and price of product has made such that the price of freight has become insignificant. So we're not seeing any issues of freights being curtailed because of the price of freight because the oil underlying is so valuable and it's also so important for the security of supply.”

Does the re-upped $500 million buyback signal a pivot in capital allocation, and what is the preference for using capital (shares, unsecured notes, converts)? How is the fleet being managed (selling, newbuildings)?

No pivot in strategy; it's a continuation of developing a strategy to deleverage, renew the fleet, and use the strong balance sheet for effective finance. The large buyback authorization allows the company to take advantage of dislocation between NAV and stock price. They will continue opportunistic sales and gentle, responsible fleet renewal, not massive orders or acquisitions. “I don't think it creates a pivot in strategy. I think this creates a point where we feel ready enough to give ourselves the largest ever buyback the company has ever had if it decides that that's the right thing to do.”

How have operations changed due to the unprecedented situation, and how do headline rates translate to the company's top line, considering potential disruption or cost/bunker impacts?

The company made a conscious effort to move ships west where market dislocation and stronger rate movements were greatest, moving vessels through the canal and around the Cape of Good Hope. This strategy paid off, despite intra-week rate volatility. Bunker planning is a daily routine, and no issues are currently encountered in securing bunkers. “We made a conscious effort to move our ships west where we could see that the market dislocation was being kind of the greatest, and there was clearly at the margin, stronger market movements taking place.”

STNG

Scorpio Tankers (STNG) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 5, 2026

Source: earnings call transcript

Executive summary

Scorpio Tankers Q1 FY26 — Strong Earnings, Strategic Capital Allocation, and Fleet Optimization

Scorpio Tankers delivered a robust Q1 FY26, marked by strong financial performance and strategic capital allocation. The company continues to fortify its balance sheet, optimize its fleet through opportunistic sales, and reduce its cost of capital, positioning it for resilience in weaker markets and leverage in stronger ones. Management is focused on returning capital to shareholders through a significant new buyback authorization and a stable dividend, while also gently renewing the fleet.

Highlights

Generated $214 million in adjusted EBITDA and $151 million in adjusted net income in Q1 FY26.
Achieved a cash position of $1.4 billion, projected to reach $2 billion early summer, with a low daily cash breakeven of $11,000.
Reduced cost of capital through 1.75% convertible bonds and a new bank facility at 120 basis points, the lowest margins in company history.
Sold 12 older vessels at prices above their original purchase levels, realizing value and optimizing the fleet.
Announced a new $500 million share buyback authorization and a quarterly dividend of $0.45 per share.

Concerns

Geopolitical developments in the Middle East remain uncertain, impacting trade flows and potentially causing disruptions.
Refined product demand is expected to decline by approximately 1.5 million barrels per day year-over-year in Q2 FY26.
Temporary loss of volumes from the Strait of Hormuz has forced global rerouting of trade flows, with seaborne exports down 1.9 million barrels per day in April compared to last year.

Guidance & targets

Category	Target	Timeline	Confidence
Cash position	$2 billion high materiality	Q2 FY26	High
Refined product demand growth	rebounding by roughly 2.4 million barrels per day medium materiality	Q3 FY26	Medium
Effective clean product supply fleet growth	approximately 3% medium materiality	Next 3 years · FY26-FY28	Medium
Ton-mile demand vs. fleet growth	outpace fleet growth high materiality	Longer term	High

STNG operating KPIs by quarter

STNG operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Vessels sold	4 This includes a $66 million gain on the sale of 4 vessels during the quarter. Source: earnings call transcript	15 We also closed on the sales of 15 vessels, all at cyclically high prices. Source: earnings call transcript	+275%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Share buyback authorization $500 million May 5, 2026

New authorization

Replenishes the securities repurchase program. $100 million already executed in April (1.4 million shares).

Deals & partnerships

not stated Sale of 4 older vessels

These vessels were part of the older fleet, built in 2014 or 2015.

not stated Sale of 2 older vessels

These vessels were part of the older fleet, built in 2014 or 2015.

not stated Agreements to sell 9 older vessels

All built in 2014 or 2015 and sold at cyclically high prices.

not stated Issuance of convertible notes $375 million 5-year

Due 2031, convertible to common stock only under certain circumstances at a conversion price over $100 per share. Repurchased 1.3 million shares for $100 million as part of the offering.

Bank of America New secured credit facility $50 million 7-year

Further optimizes capital structure and lowers cost of capital.

Capital programs

Newbuilding Commitments underway

Period spend: $59 million (Q1 FY26)

Spent to date: $59 million (Q1 FY26)

Funding: Cash on hand (hypothetically, without new debt)

Start: Since November of last year

Benefit:10 newbuilding vessels

Remaining newbuilding commitments totaled just over $641 million as of today. Approximately 80% of these remaining installment payments are not due until 2027, 2028 and 2029.

Risks & headwinds

Geopolitical developments in the Middle East uncertain

unclear when returns to the Strait of Hormuz will normalize

Mitigation:Company's low breakeven model allows performance across all environments; expects restocking and demand to reassert themselves as disruptions normalize.

Refined product demand decline Q2 FY26

expected to decline by approximately 1.5 million barrels per day year-over-year

Mitigation:Expected to rebound by roughly 2.4 million barrels per day in Q3 FY26, aligning with inventory restocking.

Temporary loss of volumes and trade flow rerouting Current

seaborne exports down approximately 1.9 million barrels per day in April compared to last year

Mitigation:Voyage distances have more than offset lower volumes, tightening effective supply and supporting strong rates; company moved ships west to capitalize on market dislocation.

What to watch in Q2 FY26

Cash position

Early summer

Current $1.4 billion as of May 1, 2026

Target Hit $2 billion

Why it matters

Indicates continued balance sheet strength and financial flexibility for capital allocation and newbuilding commitments.

Our cash position stands at approximately $1.4 billion, and it is bound to hit the $2 billion mark early in the summer

Find out whether STNG delivers this. Inve re-checks your case every morning.

Q&A highlights

Why issue a convertible bond given the strong balance sheet and high cash position? How does it impact liquidity and future opportunities?

The convertible bond was an opportunistic move, taking advantage of strong convertible markets and the company's robust credit profile. It offers a low cost of capital (1.75% coupon, high conversion premium) and proactively addresses secured debt maturing in 18-24 months, allowing for continued optimization of the capital structure.

“The convertible markets are strong right now and we have a strong credit profile. So it made for a good opportunity to execute an instrument that we view as a low cost of capital: 1.75% coupon and a high conversion premium.”

asked by Greg Lewis · answered by Chris Avella

2 min read 6 chapters

Detailed narrative

Balance Sheet Fortification and Cost of Capital

Scorpio Tankers has significantly strengthened its balance sheet, reducing net debt by $3.8 billion since December 2021 to a pro forma net cash balance of $876 million. This was achieved through proactive debt reduction and opportunistic financing, including a $375 million convertible bond at 1.75% and a new bank facility at 120 basis points, representing the lowest margins in the company's history.

These actions have transformed the company's credit profile, with approximately 60% of its debt now unsecured and not due until 2030 and 2031.

Fleet Optimization and Value Realization

The company continues to optimize its fleet by selling older vessels at cyclically high prices. Since the start of the year, 12 older vessels have been sold, with 9 more pending closing, all built in 2014 or 2015. These sales have generated significant gains, including a $66 million gain on the sale of 4 vessels in Q1 FY26, demonstrating effective fleet management and value realization.

This strategy supports capital returns and fleet renewal.

Capital Allocation Strategy

Scorpio Tankers is committed to returning capital to shareholders, evidenced by a new $500 million share buyback authorization and a quarterly dividend of $0.45 per share. The company repurchased 1.4 million shares for $100 million in April. Management emphasizes a philosophy of a "permanent" dividend that can be sustained and ideally grown through all market cycles, rather than extraordinary or high-payout dividends tied to short-term earnings.

Market Dynamics and Ton-Mile Expansion

Geopolitical disruptions, particularly in the Middle East, have led to unprecedented rerouting of trade flows, elongating ton-miles and tightening effective vessel supply. While refined product demand is expected to decline in Q2 FY26, a strong rebound is anticipated in Q3 FY26, driven by global inventory restocking.

The company notes that the price of freight has become insignificant compared to the value of the underlying oil, ensuring continued demand for shipping services despite higher costs.

Constrained Fleet Growth and Aging Fleet

Product tanker newbuilding activity has slowed, with only 37 vessels ordered year-to-date, and a significant portion of the order book (LR2s) often trades in the crude market. The effective product tanker order book is smaller than it appears, reinforcing constrained future fleet growth.

With 21% of the existing fleet older than 20 years (projected to be 30% by 2028), and many older vessels still trading, the market faces an aging fleet that is not being replaced quickly enough, supporting a constructive long-term outlook for ton-mile demand.

Newbuilding Commitments and Financial Flexibility

The company has committed to purchasing 10 newbuilding vessels, with remaining commitments totaling $641 million. These payments are largely due in 2027-2029, providing ample time to build cash. With a low cash breakeven rate of $11,000 per day, Scorpio Tankers has the financial flexibility to fund these newbuildings with cash, without incurring new debt, and views these modern vessels as attractive financing candidates for further capital structure optimization.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.