Scorpio Tankers Inc. 2026 Q3 Earnings Call

Please go ahead, sir. Thank you for joining us today.

Welcome to the Scorpio Tankers Third Quarter 2026 earnings conference call. On the call with me today are Emanuele Lauro, Chief Executive Officer, Robert Bugbee, President, Cameron Mackey, Chief Operating Officer, Chris Avella, Chief Financial Officer, Lars Dencker Nielsen, Chief Commercial Officer. Earlier today, we issued our third quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, October 28, 2026, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release, as well as Scorpio Tankers SEC filings, which are available at scorpiotankers.com and sec.gov.

Call participants are advised that the audio of this conference call is being broadcasted live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the Investor Relations page under reports and presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. If you have an additional question, please rejoin the queue. Now, I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Thank you, James, and good morning or good afternoon, everyone. Over the past quarters, I've spoken about our focus on things we can control, like strengthening our balance sheets, lowering our cost of capital and cash break evens, optimizing and renewing our fleet, and returning capital to shareholders. That approach has not changed. Today, Scorpio Tankers enters the fourth quarter of 2026 in the strongest financial position in its history, with a modern fleet and considerable flexibility to navigate the cycles ahead. In the third quarter, we generated an adjusted EBITDA of $172 million and adjusted net income of $127 million. To appreciate how far we have come, five years ago, the company had $3.1 billion in debt and just $230 million in cash. Today, we have $655 million in debt and more than $2 billion in cash.

At the same time, we've continued to lower our daily cash break evens, which is now below $11,000 per day per vessel. This gives a significant structural advantage. In a strong market, we're positioned to generate substantial free cash flow. In a weaker market, our low break evens and strong balance sheet provide resilience and the flexibility to take advantage of opportunities. We have applied the same discipline to our fleet. As I mentioned last quarter, we've sold older vessels at attractive prices and selectively reinvested in modern, fuel-efficient tonnage. This is our approach to fleet renewal, realizing value from existing assets while strengthening the fleet for the years ahead. Turning to markets, the fourth quarter is off to a much stronger start as we enter what is typically the seasonally strongest part of the year.

To date, for Q4, we've booked our LR2s at approximately $181,000 per day, MRs at $56,000 per day, and our Handymax vessels at $40,000 per day. While crude tankers have led the broader market in 2026, product tankers have begun to follow. Increasing crude volumes from the Middle East are supporting higher refinery runs and refined product exports. Together with the constrained vessel supply, we believe these dynamics are creating favorable conditions for product tankers and the potential for further strengthening in rates. As always, there is uncertainty around how markets and geopolitical events will evolve. As I said last quarter, our job is not to predict the cycle. Our job is to be prepared for it. That brings me to capital returns. Today, our board increased the quarterly dividend from $0.45 per share to $0.75 per share. This is an increase of approximately 67%.

This decision reflects the strength of our balance sheets and our confidence in the company's ability to return capital to shareholders through the cycle. We expect to continue increasing the dividend annually. We have built a platform that can generate meaningful cash flow in strong markets, remain resilient in weaker ones, and preserve the flexibility to invest when the opportunity arise. That philosophy has guided us for many years, and it will continue to guide us in the years ahead. Just would like to thank you for your continued support. My opening remarks are over, and I would now like to turn the call to Robert.

Thank you. Thank you very much, Emanuele.

Wow, what a fantastic report this is. There are a few things I'd like to highlight that aren't necessarily on this report, clearly. First of all, the cash balance as of today doesn't really demonstrate the real strength of the company. We should note that the spot revenue cash that is being generated the whole of October has had no distribution yet from our pools to the company. In this sense, the cash balance is understated.

Pro forma, we are still awaiting the conclusion of the sale for $145 million from two LR2 sales with later for delivery later this year. Lastly, we are going to do something unusual. These are special earnings. I think you should see what we are seeing underneath this, that our markets have accelerated quite steadily since July. As we approach, as Emanuele indicated, the strongest part of our year, and bearing in mind this is still only October and we are not even near Thanksgiving yet, I think it is worth looking at the monthly movements since July in our markets. The MRs in July earned approximately 29,000, in August 30,000, in September 32,000, in October 53,000, and in November, for the first 37%, nearly 70,000. The LR2s in July earned 55,000, August 71,000, September 82,000, October 168,000, and for 37% so far in November, approximately $215,000 a day.

I think this is really showing how the refineries have been steadily receiving more oil, and as they receive the more oil, they export it. All of this is before we get to the strongest, real strength in the market traditionally, which normally comes a week. It has been a week before Thanksgiving and two weeks after. With that, I would like to pass it over to James.

Thanks, Robert. Slide seven, please. Product tanker earnings have been improving for several months, but the real acceleration has come in just the past few weeks, as Robert has highlighted. Since May, Middle East crude exports have more than doubled, from 8 million barrels a day to nearly 17 million. The additional crude supply has helped drive a 4 million barrel per day increase in global refinery runs, translating into higher product exports and stronger tanker rates. We believe the fundamentals point to further strengthening. Low inventories, resilient demand, rising refinery runs, longer trade routes, and limited vessel supply. Slide eight, please. In September, seaborne product exports reached 20.6 million barrels per day, a 14% increase from their May lows. Much of this growth has been driven by Asia, where increased crude availability has allowed refinery runs and exports to increase.

Around 20% of Asian exports are going long-haul to destinations west of the Suez Canal. This has strengthened LR2 and MR rates in Asia, but also globally, as longer voyages and fleet repositioning tighten supply. Slide nine, please. There has been considerable discussion about inventory restocking, with more than 600 million barrels drawn since the start of the conflict. There is an important point that often gets overlooked. Underlying demand remains strong. Much of the additional refinery output will first be needed to meet current consumption, supporting higher product tanker volumes. Only after that can inventories begin to rebuild, creating another potential tailwind for tanker demand. In other words, we see two sources of demand meeting today's consumption and replacing yesterday's draws. Slide 10, please. Over the past decade, global refining capacity has shifted further away from the end consumer, and overall net capacity growth has been limited.