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    STNG
    Earnings call· Jun 2026(Q2 FY26)

    Scorpio Tankers Q2 FY26 earnings call STNG

    Jul 30, 2026 Source

    Executive summary

    Scorpio Tankers Q2 FY26 — Record Earnings and Balance Sheet Transformation

    Scorpio Tankers delivered record Q2 FY26 results, driven by strong market conditions and strategic financial management. The company significantly strengthened its balance sheet through a low-cost convertible bond issuance and substantial debt reduction, achieving a net cash position. While geopolitical uncertainty and moderating freight rates present headwinds, the company remains focused on fleet optimization, capital returns, and maintaining a low cash breakeven to navigate market cycles.

    Highlights

    5

    • Generated adjusted EBITDA in excess of $300 million and adjusted net income of $243.7 million, marking the strongest quarter in company history.

    • Strengthened financial position with cash exceeding $1.9 billion and a net cash position of $1.3 billion, equivalent to $26 per share.

    • Completed a convertible bond issuance of $605 million at a yield to maturity below 1%, replacing higher-cost debt and reducing cash breakeven to below $11,000 per day.

    • Returned over $175 million to shareholders through the repurchase of 2 million shares for $155 million and a quarterly dividend of $0.45 per share.

    • Optimized fleet by selling 19 older vessels at attractive prices and taking delivery of the first MR newbuilding, STI Moxie, with 13 vessels remaining on order.

    Concerns

    2

    • Freight rates have moderated from exceptional levels experienced earlier in the year, though they remain above $30,000 per day.

    • Geopolitical developments, particularly in the Middle East, continue to create uncertainty, with recent attacks on commercial vessels in the Red Sea.

    Guidance & targets

    4
    CategoryTargetConfidence
    Fleet growth
    3%-4%
    medium materiality
    Medium
    Ton-mile demand growth
    outpace fleet growth
    high materiality
    High
    Newbuilding deliveries
    13 vessels remaining
    medium materiality
    High
    MR newbuilding delivery
    STI Moxie delivering tomorrow
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Product Tankers (Company-wide)
    The company achieved its highest average daily TCE rate in history during Q2 FY26. Current product tanker rates remain strong, generating significant free cash flow.
    Average daily TCE rate (Q2 FY26): highest in company historyProduct tanker rates (current): above $30,000 per day
    		————
    LR2 Fleet
    LR2s are opportunistically trading in the crude market due to strong Aframax rates, with a significant portion of the fleet currently engaged in crude oil transport. Q3 FY26 TCE rates for LR2s are tracking at $65,000 per day.
    Q3 FY26 TCE rate (so far): $65,000 per dayFleet trading crude oil: 66% of LR2 fleet
    		————
    MR Fleet
    The MR market, particularly in the Atlantic Basin, has shown profound volatility and resurgence, with TC14 rates recently moving north of $320,000 per day.
    TC14 rates (recent): north of $320,000 per day
    		————

    Operational metrics

    28
    Adjusted EBITDA
    $300.5M
    Q2 FY26

    Adjusted EBITDA for the second quarter, marking the strongest in company history.

    Adjusted Net Income
    $243.7M
    Q2 FY26

    Adjusted net income for the second quarter.

    Cash Position
    $1.9B
    current

    Current cash position of the company.

    Net Cash Position
    $1.3Bvs $2.9B net debt end 2021
    current

    Net cash position as of today, representing a $4.2 billion reduction in net debt since December 2021.

    Available Liquidity
    $2.4B
    as of July 28

    Total available liquidity including cash and undrawn revolving credit facilities.

    Cash Breakeven Rate
    $11,000lowest in company history
    current

    Daily cash breakeven rate, including vessel operating costs, cash G&A, cash interest payments, commitment fees, and scheduled loan amortization.

    Cash Flow Generation Potential (at $20k/day)
    $246M
    annual

    Illustrative cash flow generation potential at a rate of $20,000 per day.

    Cash Flow Generation Potential (at $30k/day)
    $520M
    annual

    Illustrative cash flow generation potential at a rate of $30,000 per day.

    Convertible Bonds Issued
    $605M
    Q2 FY26

    Aggregate principal amount of senior unsecured convertible notes issued, including an initial offering and a follow-on offering.

    Debt Repaid
    $589M
    Q2 FY26

    Amount of higher-cost debt repaid during the quarter using proceeds from convertible bond issuance.

    Legacy Secured Debt Repaid
    $389M
    Q2 FY26

    Repayment of legacy secured debt across five credit facilities, all due to mature in 2028.

    Senior Unsecured Notes Redeemed
    $200M
    July 2026

    Redemption of senior unsecured notes in July.

    Total Debt Outstanding
    $655M
    as of July 30

    Total debt outstanding as of the call date.

    Weighted Average Margins on Secured Debt
    120 bpsvs 170-197.5 bps on repaid debt
    new facilities

    Margins on recently executed credit facilities, reflecting efforts to lower cost of debt.

    Gain on Vessel Sales
    $154M
    Q2 FY26

    Gain recognized from the sale of 10 vessels during the quarter.

    Vessels Sold
    19
    YTD 2026

    Number of older vessels sold since the beginning of the year as part of fleet optimization.

    LR2 Fleet Age (over 20 years old)
    21%
    current

    Percentage of the product tanker fleet that is over 20 years old.

    LR2 Fleet Age (over 20 years old) by 2028
    31%
    by 2028

    Projected percentage of the product tanker fleet that will be over 20 years old by 2028.

    Aframax/LR2 Fleet Sanctioned
    25%
    current

    Percentage of the Aframax/LR2 fleet that is sanctioned, with an average age of 19 to 21 years.

    MR/Handy Fleet Sanctioned
    9%
    current

    Percentage of the MR/Handy fleet that is sanctioned, with an average age of 19 to 21 years.

    Refined Product Demand Growth (since 2019)
    4.5M bbl/day
    since 2019

    Growth in refined product demand since 2019.

    Net Capacity Additions (since 2019)
    1.8M bbl/day
    since 2019

    Net capacity additions in refining since 2019.

    Global Visible Inventories Drawdown
    400M bbl
    since conflict start

    Total drawdown in global visible inventories since the start of the conflict.

    Refined Product Demand Increase
    3M bbl/day
    through year-end

    Expected increase in demand for refined products through year-end.

    Seaborne Refined Product Exports Decline
    2.3M bbl/day11% YoY
    June

    Decline in seaborne refined product exports in June, largely offset by longer voyage distances.

    Strait of Hormuz Tanker Flows
    12.6M bbl/day
    mid-June

    Tanker flows through the Strait of Hormuz after an MOU was signed in mid-June.

    Seaborne Crude Volumes Increase
    1M bbl/day
    current

    Increase in seaborne crude volumes driven by Middle East disruption and rising production from the US, Canada, and Latin America.

    Refinery Runs Down
    5M bbl/dayYoY
    July

    Year-over-year decline in refinery runs in July.

    Industry KPIs

    3
    MetricValueDetails
    Realized price differential$30,000USD per day
    FCF shareholder distributions$175MUSD
    Take or pay contract structure3vessels

    Orderbook & backlog

    1
    Newbuilding and Joint Venture Commitments$978MJuly 30, 2026

    Excludes any potential financing; spread out over the next 4 years.

    Deals & partnerships

    2
    UndisclosedTime charter agreements for MR vesselsminimum 3 years

    Entered into charter agreements for 3 MR vessels for a minimum period of 3 years, expected to commence in December 2026.

    UBO of largest private shipbuilder in ChinaMinority interest in a joint venture for VLCCs

    Contributed equity for a minority interest in a joint venture for 8 VLCCs. The partner is the UBO of the largest private shipbuilder in China, representing a strategic relationship.

    Capital programs

    2
    Newbuilding Vesselsunderway
    Funding: cash

    Benefit: 14 vessels

    Commitments for 14 newbuilding vessels, with payments spread over the next four years, fully fundable by current cash.

    VLCC Joint Ventureunderway
    Funding: cash

    Benefit: 8 VLCCs

    Equity contribution for minority interest in a joint venture for 8 VLCCs, with payments spread over the next four years, fully fundable by current cash.

    Risks & headwinds

    3
    Geopolitical uncertainty in the Middle Eastongoing

    Red Sea attacks on 2 commercial vessels last week; Strait of Hormuz fragility; potential rerouting around Cape of Good Hope (doubling sailing distances)

    Mitigation: Strengthening balance sheet, lowering cost of capital, reducing cash breakevens, optimizing fleet, renewing asset base, maintaining sustainable liquidity.

    Moderation of freight ratescurrent

    Rates have moderated from exceptional levels earlier in the year, though remain above $30,000 per day.

    Mitigation: Focus on generating meaningful free cash flow at current levels; preparing for cyclical nature of shipping.

    Cyclical nature of shipping businesslong-term

    Markets rise and fall; geopolitical events introduce unpredictability.

    Mitigation: Being prepared for cycles by strengthening financial position and maintaining flexibility to capitalize on opportunities.

    What to watch in Q3 FY26

    5

    Refinery runs in Asia and Europe

    next quarter
    CurrentJuly runs down 5M bbl/day YoY globally
    TargetPick up in runs and increased regional trading

    Why it matters

    Increased refinery activity and regional trade will drive demand for MR vessels and support freight rates.

    And so I think runs are going to pick up in those regions, and you'll get increased regional trading, which is going to be fantastic for the medium range ships.

    Q&A highlights

    8

    Are LR2s becoming more fungible between clean and dirty markets, and is Scorpio Tankers actively trading its LR2s in the dirty market, given the strong Q3 LR2 rates?

    LR2s have always opportunistically dipped into the dirty market, and fungibility with Aframaxes has been very apparent for years. The decision is vessel-by-vessel. Currently, about 170 clean LR2s trade clean, while over 250 Aframaxes trade dirty. The strong Atlantic Basin Aframax market has drawn LR2s, but vessels quickly flip back to clean if spreads change. The LR2 and Aframax markets should be viewed as a closer unison unit.

    “I think -- and I've mentioned this before on these calls that you need to today look at LR2s and Aframaxes as a much closer unison unit.”

    asked by Omar Nokta · answered by Lars Nielsen

    2 min read7 chapters

    Detailed Narrative

    01

    Record Financial Performance and Balance Sheet Strength

    Scorpio Tankers achieved its strongest quarter ever, reporting adjusted EBITDA over $300 million and adjusted net income of $243.7 million. The company's cash position now exceeds $1.9 billion, resulting in a net cash position of $1.3 billion, or approximately $26 per share. This significant balance sheet transformation provides considerable optionality amidst market volatility🌐.

    02

    Strategic Refinancing and Cost Reduction

    The company executed a highly attractive financing transaction, issuing $605 million in convertible bonds with a yield to maturity below 1%. This allowed for the repayment of $589 million of higher-interest debt (5%-7.5%), significantly reducing the cost of funding. As a result, the daily cash breakeven rate has fallen to below $11,000 per day, the lowest in the company's history.

    03

    Fleet Optimization and Renewal

    Scorpio Tankers continued its fleet optimization strategy, selling 19 older vessels (11-12 years old) at prices above their original cost. The last four LR2 sales were at prices exceeding the cost of newbuilding LR2s on order. The company is renewing its fleet with more fuel-efficient vessels, with the first MR newbuilding, STI Moxie, delivering shortly, bringing the orderbook to 13 vessels.

    04

    Capital Returns to Shareholders

    Returning capital to shareholders remains a priority. During the quarter, the company repurchased approximately 2 million shares for $155 million. Additionally, the Board declared a quarterly dividend of $0.45 per share. These actions combined represent over $175 million returned to shareholders in Q2 FY26.

    05

    Product Tanker Market Dynamics

    Despite moderation from peak levels, product tanker rates remain above $30,000 per day, generating significant free cash flow. Geopolitical events, particularly in the Middle East, continue to drive uncertainty and potential rerouting, increasing ton-mile demand. Global inventories are significantly drawn down, and refinery dislocation means new capacity is farther from consumers, supporting a constructive market outlook.

    06

    LR2 Crossover and Effective Supply

    The Aframax/LR2 crude tanker market is strong, with spot rates above $100,000 per day, leading Scorpio Tankers to move some LR2s into crude trade. Currently, 66% of the LR2 fleet is trading crude oil, which is expected to continue. This crossover, combined with an aging fleet (21% over 20 years old) and sanctioned capacity, suggests effective product tanker supply growth will be more moderate than the headline orderbook implies (3-4% over 3 years).

    07

    VLCC Joint Venture

    The company entered a joint venture for 8 VLCCs, a strategic investment with the UBO of the largest private shipbuilder in China. This partnership provides exposure to the VLCC sector and leverages a long-standing relationship, with financial exposure not being meaningful relative to Scorpio Tankers' balance sheet.

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