Scorpio Tankers 2025Q3: Contradictions Emerge on Market Outlook, Share Repurchases, Dividend Strategy, and Fleet Expansion

Date of Call: October 30, 2025

Financials Results

• EPS: $1.49 per diluted share (adjusted net income of $72.7M)

Guidance:

• Announced a 5% increase in the quarterly dividend and will review the dividend at least annually.
• Expect to prepay $154.6M of loan principal in Q4 2025, covering scheduled amortization for 2026–2027.
• After prepayments, no scheduled principal amortization on existing debt for all of 2026–2027.
• Cash breakeven expected to fall to approximately $11,000 per day.
• Liquidity approximately $1.4B (cash $627M + $788M revolver availability).
• Cash generation examples: ~$315M/year at $20k/day; ~$666M at $30k/day; ~$1B at $40k/day.
• Company outlook constructive for product/crude markets into Q4 and Q1.

Business Commentary:

* Financial Performance and Cash Position: - Scorpio Tankers reported adjusted EBITDA of $87.7 million and adjusted net income of $72.7 million in Q3 2025. - The company's liquidity stands at approximately $1.4 billion, including cash, undrawn revolving credit, and its investment in DHT. - This strong financial performance and cash position are attributed to reduced daily breakeven costs and strategic debt repayment decisions.

• Product Tanker Market Trends:
• Product tanker rates have increased, with MRs earning around $28,000 per day and LR2s about $35,000 per day.
• The market is expected to remain constructive due to factors like strong crude and refined product demand, seasonality, and emerging catalysts.

• The growth is driven by enduring structural trends in the product tanker market, such as evolving trade patterns and a shift in global refining.

• Debt Reduction and Liquidity:

• Scorpio Tankers is expected to prepay $154.6 million of its scheduled loan amortization across four different credit facilities.
• This prepayment will result in no scheduled principal amortization on existing debt for 2026 and 2027, reducing cash breakeven levels.

• The company's proactive debt management strategy is aimed at maintaining a strong balance sheet and enhancing its ability to navigate market uncertainties.

• Dividend Strategy and Shareholder Value:

• The company announced a 5% increase in its quarterly dividend, with plans for future annual reviews to ensure sustainability and growth.
• The decision is part of a strategy to create long-term value for shareholders while remaining investable through market cycles.
• The dividend increase reflects the company's strong financial performance and commitment to returning capital to shareholders.

Sentiment Analysis:

Overall Tone: Positive

• CEO: "We are pleased to report another quarter of strong financial results." CFO: liquidity ~ $1.4 billion and prepayments reducing breakeven to ~$11,000/day. Company announced a 5% dividend increase and highlighted strong adjusted net income of $72.7M ($1.49/share). Management repeatedly described market fundamentals as "constructive" and expects strengthening into Q4/Q1.

Q&A:

• Question from Omar Nokta (Jefferies LLC): Do you feel like you're building towards something here, something more significant for this balance sheet to be put to use at some point down the line? Or do you think this is a bit more of a new normal for Scorpio to be in a net cash position long term with an eye on keeping that dividend sustainable throughout the cycles?
  Response: Priority is maintaining a sustainable regular dividend and a strong balance sheet to preserve optionality; they expect to reach net cash and will use discipline when deploying capital.

• Question from Omar Nokta (Jefferies LLC): When does it make sense to start buying ships to offset perhaps some of the sales of the older ones? Are you content to keep scaling back a bit, selling some more of the older ones without replacing?
  Response: No immediate need to renew fleet; acquisitions will be opportunistic and driven by math/pricing—will sell older vessels if attractive and only buy when economics are compelling.

• Question from Tim Chang (Bank of America): How do you see rates progressing higher given under half of days booked quarter-to-date, and what pushes them higher over the next 40–60 days (OPEC unwind, sanctions, seasonality, importers of Russian product seeking alternatives)?
  Response: Expect rates to rise into Q4 and likely into Q1 as refinery restarts, sanctions-driven longer-haul flows and LR2s moving dirty tighten available clean-product tonnage and boost demand.

• Question from Christopher Robertson (Deutsche Bank AG): You had extensive dry docks completed during 2025—what uplifts and efficiency have you realized and is that translating into higher rate premiums?
  Response: Dry docks focused on maintenance and hull/coating resets returning ships to ~5-year condition with immediate benefits; no large CapEx or speculative efficiency upgrades without clear ROI.

• Question from Christopher Robertson (Deutsche Bank AG): On Chinese export quotas for next year—do you have a view and is there a possibility they increase quotas given rising refining capacity?
  Response: Quotas are government-determined and uncertain; any change would follow crude import/production shifts—need to see crude volume data before expecting quota increases.

• Question from Liam Burke (B. Riley Securities): Where do buybacks sit in the capital allocation equation going forward?
  Response: Buybacks are opportunistic with no announced trigger or timing; company retains flexibility and will act when appropriate.

• Question from Liam Burke (B. Riley Securities): As markets strengthen, will ships that went dirty return to clean trading or will strength in crude keep them dirty?
  Response: Expect many LR2s to remain or move dirty because crude rates are more attractive, which will further tighten clean-product supply.

• Question from Jonas Shum (Clarkson): With substantial deleveraging and a relatively young fleet, is there any limit to how low leverage you want to go and how will you balance fleet renewal, growth and shareholder returns?
  Response: No fixed lower leverage target; they value optionality from a strong balance sheet amid geopolitical uncertainty and will deploy capital opportunistically rather than rush decisions.

• Question from Jonas Shum (Clarkson): You agreed with banks to prepay $155M of debt—can you break that down by facility and how much free liquidity will remain?
  Response: Prepayment split: $19M against the $94M facility, $92M against the $1B facility, $34M against the $117M facility and $9M against the $49M facility; ~$7M affects the revolver and the remainder reduces term debt that is not redrawable.

Contradiction Point 1

Product Tanker Market Outlook

It involves differing perspectives on the outlook for the product tanker market, which is crucial for the company's financial performance and strategic decisions.

Will rates increase beyond current levels given less than half the quarter's days are booked? - Tim Chang (Bank of America)

2025Q3: We're now moving from confidence in Q4 strength to optimism for Q1 as well, based on Lars' assessment of market dynamics. - Robert Bugbee(CEO)

What factors could affect the product tanker market over the next 90 days and impact the current quarter-to-date numbers? - Jonathan B. Chappell (Evercore ISI)

2025Q2: The market has been steady with MR rates between $20,000 and $25,000 and LR2 rates in the high $20,000s to low $30,000s. - James Doyle(CFO)

Contradiction Point 2

Share Repurchases

It highlights differing positions on when and if share repurchases should be considered, which is important for capital allocation and investor expectations.

How do buybacks fit into the capital allocation strategy? - Liam Burke (B. Riley Securities, Inc., Research Division)

2025Q3: We have flexibility to act on buybacks, but there's no prescribed timeline. We'll act when opportunities arise. - Robert Bugbee(CEO)

Has your stance on share repurchases changed recently? - Omar Nokta (Clarksons Platou Securities)

2025Q2: The company maintains its position on share buybacks, awaiting more clarity on macroeconomic risks. No significant change in strategy. - Robert L. Bugbee(CEO)

Contradiction Point 3

Dividend Strategy and Capital Allocation

It involves the company's strategic approach to dividends and capital allocation, which directly impacts shareholder returns and financial planning.

Are you building toward significant future use of the balance sheet, or is this a new normal for Scorpio to maintain a long-term net cash position to sustain dividends through cycles? - Omar Nokta (Jefferies LLC, Research Division)

2025Q3: We're very convinced that the right thing is to maintain a regular dividend, ensuring sustainability. Our strong balance sheet allows us to navigate market cycles. Building cash and lowering breakeven levels provides great optionality, allowing us to make strategic decisions without changing our leverage much. - Robert Bugbee(President & Director)

How do you approach dividend decisions in a strong market or post-stimulus environment? Can dividends be increased or maintained? Is there potential to increase dividends? - Chris Robertson (Deutsche Bank AG, Research Division)

2025Q1: We will maintain our dividend policy going forward. We think the dividend policy is appropriate for where we are. - Robert Bugbee(President)

Contradiction Point 4

Market Outlook and Rate Expectations

It involves the company's expectations for market rates and demand, which are crucial for forecasting revenue and financial performance.

How do you see rates rising further given that less than half the days are booked this quarter? - Tim Chang (Bank of America)

2025Q3: Rates are expected to strengthen due to factors like OPEC production cuts, increased sanctions, and shifts in crude supply. The product tanker market is poised for a strong rebound, driven by tight supply and robust demand. - Lars Nielsen(Commercial Director)

What’s your outlook on ship values? Are ship values holding up? Are there transactions indicating market trends? - Omar Nokta (Jefferies)

2025Q1: With the trade tensions and increasing demand in China, we expect tanker demand to remain robust. And as we've said, we think the fundamentals are very positive. - Emanuele Lauro(CEO)

Contradiction Point 5

Fleet Renewal and Expansion

It involves differing stances on the company's approach to fleet renewal and expansion, which is essential for growth and competitive positioning.

When is it time to start purchasing vessels to offset older vessel sales? - Omar Nokta (Jefferies LLC, Research Division)

2025Q3: We're not in a rush to buy ships. The market is strong, and we're maintaining a flexible balance sheet. Any purchases would be based on favorable pricing and strategic value rather than necessity. - Robert Bugbee(CEO)

Given the young fleet, do you have plans to purchase new vessels for replacement or fleet expansion? - Omar Nokta (Clarksons Platou Securities)

2025Q2: No immediate plans for new vessel purchases. The company monitors the S&P and newbuilding markets but remains focused on current operations. - Robert L. Bugbee(CEO)