Initiating Coverage of Scorpio Tankers at Equal-weight

Research evidence excerpt

Initiating Coverage of Scorpio Tankers at Equal-weight

FoundationMability to invest counter-cyclically and return capital through the cycle. STNG stands

out due to its combination of a top-tier fleet, high earnings leverage, strong balance

sheet, and disciplined capital returns, all supported by favorable structural trends in

global refined product shipping.

• Management currently estimates that its daily cash break-even time

charter equivalent (TCE) rate is ~$11,000/day, the lowest level in the

company's history. Its current break-even (which includes vessel operating

costs, cash G&A, interest payments and commitment fees, and regularly

scheduled loan amortization) is below STNG's achieved daily TCE rates

dating back to 2013, with the closest point occurring during Covid, when

global oil demand saw its largest decline on record.

• Deleveraging efforts in recent years have moved STNG to a net cash

position. At the end of 2021, STNG had $2.9bn of net debt ($3.3bn of

outstanding debt against $230mm of cash). As of May 2026, it had a net pro

forma cash position of $876mm (reducing debt to $932mm, with $1.8bn of

cash). Management expects the cash position to exceed $2bn by this

summer. This lack of debt is an important differentiator for STNG within the

tanker industry, largely insulating it from debt covenant and liquidity issues

in a cyclical downdraft and lowering its cost of capital (further reducing its

cash break-even levels).

• STNG has matched its financial flexibility with a disciplined approach to

new growth investment. Volatility in tanker rate cycles is unavoidable, but

tanker companies can run into significant challenges with capital allocation

decisions that run imprudently high leverage unable to withstand the full