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    STNG
    Earnings call· Mar 2026(Q1 FY26)

    Scorpio Tankers Q1 FY26 earnings call STNG

    May 5, 2026 Source

    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

    5

    • 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

    3

    • 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

    4
    CategoryTargetConfidence
    Cash position
    $2 billion
    high materiality
    High
    Refined product demand growth
    rebounding by roughly 2.4 million barrels per day
    medium materiality
    Medium
    Effective clean product supply fleet growth
    approximately 3%
    medium materiality
    Medium
    Ton-mile demand vs. fleet growth
    outpace fleet growth
    high materiality
    High

    Operational metrics

    28
    Adjusted EBITDA
    $214 million
    Q1 FY26

    Generated in the first quarter.

    Adjusted Net Income
    $151 million
    Q1 FY26

    Generated in the first quarter.

    Net Income (IFRS basis)
    $216 million
    Q1 FY26

    Includes a $66 million gain on the sale of 4 vessels.

    Cash and equivalents
    $1.4 billion
    as of May 1, 2026

    Pro forma cash balance of $1.8 billion including sales of 3 vessels pending closing as of that date.

    Pro Forma Net Cash Balance
    $876 millionvs. $2.9 billion net debt at end of 2021
    as of May 5, 2026

    Represents a reduction of $3.8 billion in net debt since December 2021.

    Daily Cash Breakeven Rate
    $11,000lowest levels in company's history
    Current

    Allows resilience in weaker markets and leverage in stronger ones.

    Convertible Bonds Coupon Rate
    1.75%lowest margins in company history
    Issued

    Issued under a month ago, convertible to common stock only under certain circumstances at a conversion price over $100 per share.

    New Bank Facility Margin
    120 basis pointslowest margins in company history
    Announced

    Secured credit facility.

    Secured Bank Debt
    $368 million
    Current

    With a lending group exclusively comprised of experienced shipping lenders.

    Senior Unsecured Notes
    $200 milliontrading above 103 to par
    Current

    Part of the evolving capital structure.

    Unsecured Debt Percentage
    60%
    Current

    Approximately 60% of debt structure is unsecured.

    Total Available Liquidity
    $2.5 billion
    as of May 1, 2026

    Strong liquidity profile.

    Refined Product Inventories Decline
    80 million barrels
    since start of year

    High-frequency refined product inventories have declined significantly.

    U.S. Refined Product Inventories Draw
    12 out of 13 weeks
    Recent

    Highlights the scale of the drawdown and reinforces the magnitude of the restocking cycle ahead.

    Product Tanker Newbuilding Orders
    37 vesselsslowed meaningfully over past 18 months
    Year-to-date

    Reinforces the view that future fleet growth will remain constrained.

    LR2 Fleet Trading Crude Oil
    57%
    Today

    As a result, the effective product tanker order book is smaller than it appears.

    Product Tanker Fleet Age (20+ years)
    21%
    Today

    Much of this tonnage would have likely already exited the fleet in a normal market.

    Aframax LR2 Fleet Sanctioned Age
    20 to 21 years old
    Average

    Sanctioned capacity.

    MR Handy Fleet Sanctioned Age
    20 to 21 years old
    Average

    Sanctioned capacity.

    Refined Product Demand Decline
    1.5 million barrels per dayyear-over-year
    Q2 FY26

    Expected to decline before rebounding in Q3.

    Seaborne Exports Decline
    1.9 million barrels per daycompared to last year
    April

    Aligns with what's seen on the water.

    Cash Flow Potential
    $260 millionat $20,000 per day
    Annual

    Illustrates cash generation potential at low cash breakeven levels.

    Cash Flow Potential
    $548 millionat $30,000 per day
    Annual

    Illustrates cash generation potential at low cash breakeven levels.

    Cash Flow Potential
    $836 millionat $40,000 per day
    Annual

    Illustrates cash generation potential at low cash breakeven levels.

    Cash Flow Potential
    $1.1 billionat $50,000 per day
    Annual

    Illustrates cash generation potential at low cash breakeven levels.

    Product Tanker Order Book Percentage
    18%
    Today

    May seem high, but context matters with aging fleet.

    LR2s Trading Crude Market
    256vs. 170 today
    A couple of years ago

    Reflects shift due to sanctioned fleet and age.

    Quarterly Dividend Per Share
    $0.45
    Q1 FY26

    Declared as part of deliberate capital allocation.

    Orderbook & backlog

    1
    Share buyback authorization$500 millionMay 5, 2026

    New authorization

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

    Deals & partnerships

    5
    not statedSale of 4 older vessels

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

    not statedSale of 2 older vessels

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

    not statedAgreements to sell 9 older vessels

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

    not statedIssuance of convertible notes$375 million5-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 AmericaNew secured credit facility$50 million7-year

    Further optimizes capital structure and lowers cost of capital.

    Capital programs

    1
    Newbuilding Commitmentsunderway
    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

    3
    Geopolitical developments in the Middle Eastuncertain

    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 declineQ2 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 reroutingCurrent

    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

    5

    Cash position

    Early summer
    Current$1.4 billion as of May 1, 2026
    TargetHit $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

    Q&A highlights

    5

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    Market Dynamics and Ton-Mile Expansion

    Geopolitical disruption🌐s, 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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.