Scorpio Tankers
Annual Report 2015

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Plain-text annual report

2015 A N N U A L R E P O R T DE AR SHAREHOLDER: 2015 was a good year for Scorpio Tankers. With our gasoline. Saudi Arabia continues to evolve from a sim- newbuilding vessels largely delivered and our operating ple exporter of crude to a global supplier of products, platform enhanced, we produced results which we feedstocks and petrochemicals to destinations as far believe fairly reflect the strength of our balance sheet, as Japan to the East and Mexico to the West. Finally, the high quality of our assets, and improving industry as underlying demand for refined petroleum grows, fundamentals. Among our accomplishments in 2015: land-based infrastructure is slow to follow, meaning • Net income was $217.7 million, or a 318% increase from our 2014 net income of $52.1 million. If one were to disregard gains and losses on the sale of ves- ships remain the best (and many times the only) delivery vehicle, also a critical storage vehicle, for much of the world. sels and our investment in Dorian, our year-over-year • Customers and regulators are more discerning. Tired increase in net income would have been 2,752%. of scofflaws, our regulators and counterparties con- • Cash flow from operations was $392.0 million, or a 317% increase from our 2014 cash flow from opera- tions of $93.9 million. • We completed the last significant step of our new- building program, with the delivery of 12 MR, 12 LR2, and two Handymax product tankers, all of which have entered service. • We completed the divestiture of our older vessels by selling four ships. At the time of this letter, our fleet consists of 78 product tankers (45 MRs, 19 LR2s, and 14 Handymaxes) with an average age of 1.5 years. We have one of the youngest and largest product tanker fleets in the world. In addition to these achievements, the industry land- scape remains attractive, evidenced by several factors: • Global demand for refined oil continues to grow, but it is (thankfully) uneven. For each of the myriad outputs of the refining process, surplus in one part of the world will inevitably be “crossed” with deficit in another. For instance, China’s thirst for octane is having a pronounced impact on the runs of U.S. Gulf refiners. Europe as a whole remains “long” diesel and “short” tinue to tighten their standards and improve their auditing and verification regimes. Consequently, ship- ping companies who wish to cut corners are finding fewer places to hide. Scrapping of older vessels is accelerating, but more importantly, the recognition of quality service among our customers is improving. • Capital is selective and at times flighty. Lenders to our industry are experiencing stress across neighbor- ing sectors of the oil service and offshore exploration and drilling, dry bulk, and containers. Many smaller or private ship owners cannot access debt as they would like. As far as equity investment is concerned, there are a number of non-traditional vessel owners who are currently looking to exit the industry—in short, the cycle of a closed-end fund will not conve- niently match the cycle of our industry. We expect dampened net investment in product tankers for some time, and, as a by-product of this condition, vola- tility in the sale and purchase market as assets move slowly but inexorably from weaker to stronger hands. Importantly, we continue to believe in responsibly man- aging our business through a period of positive secular trends for product shipping. We do not have a crystal ball. The world, and by extension our business, is I am as excited as ever about the prospects for susceptible to shocks from unknown and unknow- Scorpio Tankers, and I thank you for your contin- able corners, and above all we maintain a disciplined ued support. Sincerely, EMANUELE A. LAURO Chairman and Chief Executive Officer posture towards our balance sheet. The most diffi- cult decisions are those made before, not when, they become necessary. To wit, in February, with global economic conditions uncertain, we took the decision to sell five MR tankers to a strategic part- ner. We are using the proceeds to reduce our debt and to increase our liquidity, and we continue to monitor the global markets and the shipping markets, from a position of strength. From an operational standpoint, we have not changed our goals. We are focused on safety and efficiency, in that order. While we appear in many respects to be a business of hard assets, at our core we depend on relationships and the dedication of our team to move the Company forward. On this point, I couldn’t be more proud of the work these profes- sionals are doing. S C O R P I O TA N K E R S 2 0 15 A N N U A L R E P O R T | P A G E 1 Year Built DWT Ice Class 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 2,872,000 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1B — 1B — — FLEET LIST OWNED VESSELS Vessel Name Handymax 1 STI Brixton 2 STI Comandante 3 STI Pimlico 4 STI Hackney 5 STI Acton 6 STI Fulham 7 STI Camden 8 STI Battersea 9 STI Wembley 10 STI Finchley 11 STI Clapham 12 STI Poplar 13 STI Hammersmith 14 STI Rotherhithe MR 15 STI Amber 16 STI Topaz 17 STI Ruby 18 STI Garnet 19 STI Onyx 20 STI Sapphire 21 STI Emerald 22 STI Beryl 23 STI Le Rocher 24 STI Larvotto 25 STI Fontvieille 26 STI Ville 27 STI Duchessa 28 STI Opera 29 STI Texas City 30 STI Meraux 31 STI Chelsea (1) 32 STI San Antonio 33 STI Venere 34 STI Virtus 35 STI Powai(1) 36 STI Aqua 37 STI Dama 38 STI Olivia (1) 39 STI Benicia 40 STI Regina 41 STI St. Charles 42 STI Mayfair 43 STI Yorkville 44 STI Milwaukee 45 STI Battery 46 STI Soho 47 STI Memphis 48 STI Tribeca 49 STI Gramercy 50 STI Bronx 51 STI Pontiac 52 STI Manhattan 53 STI Queens 54 STI Osceola 55 STI Notting Hill 56 STI Seneca 57 STI Westminster 58 STI Brooklyn 59 STI Black Hawk Total owned Handymax and MR DWT P A G E 2 | S C O R P I O TA N K E R S 2 0 15 A N N U A L R E P O R T OWNED VESSELS Vessel Name LR2 60 STI Elysees 61 STI Madison 62 STI Park 63 STI Orchard 64 STI Sloane 65 STI Broadway 66 STI Condotti 67 STI Rose 68 STI Veneto 69 STI Alexis 70 STI Winnie 71 STI Oxford 72 STI Lauren 73 STI Connaught 74 STI Spiga 75 STI Savile Row 76 STI Kingsway 77 STI Carnaby 78 STI Grace(2) Total owned LR2 DWT Year Built DWT Ice Class 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 2,089,981 — — — — — — — — — — — — — — — — — — — TIME OR BAREBOAT CHARTERED-IN VESSELS(3) Year Built DWT Ice Class Vessel Name Handymax 79 Kraslava 80 Krisjanis Valdemars 81 Iver Prosperity 82 Silent 83 Single 84 Star I MR 85 Miss Mariarosaria 86 Vukovar Targale 87 88 Gan-Trust LR1 2007 2007 2007 2007 2007 2007 2011 2015 2007 2013 37,258 37,266 37,412 37,847 37,847 37,847 47,499 49,990 49,999 51,561 1B 1B — 1A 1A 1A — — — — — — — — 89 Hellespont Progress 2006 73,728 LR2 90 Densa Crocodile 91 Densa Alligator 92 STI Lombard Total chartered-in DWT 2015 2013 2015 105,408 105,708 109,999 819,369 NEWBUILDINGS CURRENTLY UNDER CONSTRUCTION (4) Vessel Name Yard DWT MR HMD 93 Hull 2601—TBN STI Galata HMD 94 Hull 2602—TBN STI Taksim HMD 95 Hull 2603—TBN STI Leblon 96 Hull 2604—TBN STI La Boca HMD 97 Hull 2605—TBN STI San Telmo HMD HMD 98 Hull 2606—TBN STI Jurere HMD 99 Hull 2607—TBN STI Esles II HMD 100 Hull 2608—TBN STI Jardins 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 LR2 101 Hull 5004—TBN STI Jermyn 102 Hull S3120—TBN STI Selatar 103 Hull S3121—TBN STI Rambla Total newbuilding DWT Total Fleet DWT DHSC SSME SSME 109,999 109,999 109,999 745,997 6,527,347 Estimated Delivery Q1 2017 Q1 2017 Q2 2017 Q2 2017 Q3 2017 Q3 2017 Q4 2017 Q4 2017 Q2 2016 Q3 2016 Q4 2016 (1) We have entered into an agreement to sell this vessel, which is expected to close in the second quarter of 2016. (2) This vessel was delivered in March 2016. (3) See fleet list on pages 22 and 23 of Form 20-F for a description of these charter-in agreements. (4) See fleet list on pages 22 and 23 of Form 20-F for a description of our Newbuilding Program. 2015 2 0 1 5 F O R M 2 0 - F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One)  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 OR  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR For the transition period from _________________ to _________________ OR  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _________________ Commission file number: 001-34677 SCORPIO TANKERS INC. (Exact name of Registrant as specified in its charter) (Translation of Registrant’s name into English) Republic of the Marshall Islands (Jurisdiction of incorporation or organization) 9, Boulevard Charles III Monaco 98000 (Address of principal executive offices) Mr. Emanuele Lauro +377-9798-5716 info@scorpiotankers.com 9, Boulevard Charles III Monaco 98000 (Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person) Securities registered or to be registered pursuant to section 12(b) of the Act. Title of each class Common stock, par value $0.01 per share 7.50% Senior Notes due 2017 6.75% Senior Notes due 2020 Securities registered or to be registered pursuant to section 12(g) of the Act. Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. NONE (Title of class) NONE (Title of class) Name of each exchange on which registered New York Stock Exchange New York Stock Exchange New York Stock Exchange Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2015, there were 175,335,400 outstanding shares of common stock, par value $0.01 per share. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No  Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See the definitions of “large accelerated filer” and “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer  Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: Non-accelerated filer  Accelerated filer   U.S. GAAP International Financial Reporting Standards as issued by the International Accounting Standards Board Other If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  Item 17 Item 18 TABLE OF CONTENTS PART I PART II PART III ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS ............................. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE ............................................................... ITEM 3. KEY INFORMATION .................................................................................................................... ITEM 4. INFORMATION ON THE COMPANY ........................................................................................ ITEM 4A. UNRESOLVED STAFF COMMENTS ....................................................................................... ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS ................................................. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES ................................................... ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ................................. ITEM 8. FINANCIAL INFORMATION ...................................................................................................... ITEM 9. OFFER AND THE LISTING ......................................................................................................... ITEM 10. ADDITIONAL INFORMATION ................................................................................................. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES .............................. ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES ....................................... ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS ......................................................................................................................................... ITEM 15. CONTROLS AND PROCEDURES ............................................................................................. ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT ........................................................................ ITEM 16B. CODE OF ETHICS .................................................................................................................... ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES ............................................................. ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES .................... ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS .......................................................................................................................................... ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT ............................................ ITEM 16G. CORPORATE GOVERNANCE ................................................................................................ ITEM 16H. MINE SAFETY DISCLOSURE ................................................................................................ ITEM 17. FINANCIAL STATEMENTS ...................................................................................................... ITEM 18. FINANCIAL STATEMENTS ...................................................................................................... ITEM 19. EXHIBITS .................................................................................................................................... 1 1 1 1 20 40 40 95 102 106 107 108 119 120 121 121 121 121 122 122 122 122 122 123 123 123 124 124 124 124 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. This document includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as “forward-looking statements.” We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection therewith. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. When used in this document, the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “likely,” “may,” “will,” “would,” “could” and similar expressions, terms, or phrases may identify forward-looking statements. The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. In addition to important factors and matters discussed elsewhere in this report, and in the documents incorporated by reference herein, important factors that, in our view, could cause our actual results to differ materially from those discussed in the forward-looking statements include: the strength of world economies and currencies; • • general market conditions, including the market for our vessels, fluctuations in spot and charter rates and vessel values; availability of financing and refinancing; • • potential liability from pending or future litigation; • general domestic and international political conditions; • potential disruption of shipping routes due to accidents or political events; • vessels breakdowns and instances of off-hires; • • • competition within our industry; the supply of and demand for vessels comparable to ours; corruption, piracy, militant activities, political instability, terrorism, ethnic unrest in locations where we may operate; • delays and cost overruns in construction projects; • our level of indebtedness; • our ability to obtain financing and to comply with the restrictive and other covenants in our financing arrangements; • our need for cash to meet our debt service obligations; • our levels of operating and maintenance costs, including bunker prices, drydocking and insurance costs; • • • availability of skilled workers and the related labor costs; compliance with governmental, tax, environmental and safety regulation; any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to bribery; effects of new products and new technology in our industry; the failure of counterparties to fully perform their contracts with us; • general economic conditions and conditions in the oil and natural gas industry; • • • our dependence on key personnel; • • our ability to obtain indemnities from customers; • • • other factors described from time to time in the report we file and furnish with the U.S. Securities and Exchange changes in laws, treaties or regulations; the volatility of the price of our common shares and our other securities; and adequacy of insurance coverage; Commission, or the SEC. These factors and the other risk factors described in this report are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. These forward looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements, which speak only as of their dates. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please see our Risk Factors in Item 3.D of this annual report for a more complete discussion of these and other risks and uncertainties. PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. KEY INFORMATION Unless the context otherwise requires, when used in this annual report, the terms “Scorpio Tankers,” the “Company,” “we,” “our” and “us” refer to Scorpio Tankers Inc. and its subsidiaries. “Scorpio Tankers Inc.” refers only to Scorpio Tankers Inc. and not its subsidiaries. Unless otherwise indicated, all references to “dollars,” “US dollars” and “$” in this annual report are to the lawful currency of the United States. We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of tankers. As used herein, “SLR2P” refers to the Scorpio LR2 Pool, “SPTP” refers to the Scorpio Panamax Tanker Pool, “SMRP” refers to the Scorpio MR Pool, and “SHTP” refers to the Scorpio Handymax Tanker Pool, which are spot market- oriented tanker pools in which certain of our vessels operate. In addition, “HMD” refers to Hyundai Mipo Dockyard Co. Ltd. of South Korea, “SSME” refers to Sungdong Shipbuilding & Marine Engineering Co. Ltd. and “DHSC” refers to Daehan Shipbuilding Co. Ltd. A. Selected Financial Data The following tables set forth our selected consolidated financial data and other operating data as of and for the years ended December 31, 2015, 2014, 2013, 2012 and 2011. The selected data is derived from our audited consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Our audited consolidated financial statements for the years ended December 31, 2015, 2014 and 2013 and our consolidated balance sheets as of December 31, 2015 and 2014, together with the notes thereto, are included herein. Our audited consolidated financial statements for the years ended December 31, 2012 and 2011 and our consolidated balance sheets as of December 31, 2013, 2012 and 2011, and the notes thereto, are not included herein. 1 In thousands of U.S. dollars except per share and share data Consolidated income statement data Revenue: Vessel revenue ................................................. $ Operating expenses: Vessel operating costs ...................................... Voyage expenses ............................................. Charterhire ....................................................... Impairment (1) ................................................... Depreciation ..................................................... General and administrative expenses ............... Write down of vessels held for sale and net loss from sales of vessels ........................ Write-off of vessel purchase options ............... Gain on sale of VLGCs .................................... Gain on sale of VLCCs .................................... Gain on sale of Dorian shares .......................... Re-measurement of investment in Dorian........ Total operating expenses ................................. Operating income/(loss) ................................. Other income and expense: Financial expenses ........................................... Realized gain on derivative financial instruments ................................................... Unrealized (loss) / gain on derivative financial instruments .................................... Financial income Share of profit from associate .......................... Other expense, net ........................................... Total other income and expense, net ................ Net income/(loss) ............................................ $ Earnings/(loss) per common share:(2) Basic earnings / (loss) per share ....................... $ Diluted earnings / (loss) per share ................... $ Cash dividends declared per common share .... $ Basic weighted average shares outstanding ..... Diluted weighted average shares outstanding .. For the year ended December 31, 2015 2014 2013 2012 2011 755,711 $ 342,807 $ 207,580 $ 115,381 $ 82,110 (174,556) (4,432) (96,865) — (107,356) (65,831) (35) (731) — — 1,179 — (448,627) 307,084 (78,823) (7,533) (139,168) — (42,617) (48,129) (3,978) — — 51,419 10,924 (13,895) (271,800) 71,007 (40,204) (4,846) (115,543) — (23,595) (25,788) (30,353) (21,744) (43,701) — (14,818) (11,536) (21,187) (10,404) — 41,375 — — — — — — — — (189,788) 17,792 (132,556) (17,175) (31,370) (6,881) (22,750) (66,611) (18,460) (11,637) — — — — — — (157,709) (75,599) (89,596) (20,770) (2,705) (8,512) (7,060) 55 17 3 443 — 264 203 1,473 (103) (18,916) 52,091 $ 567 1,147 369 (158) (777) 17,015 $ (1,231) 35 — (97) (9,362) (26,537) $ — 51 — (119) (7,128) (82,727) (1,255) 145 — 1,316 (89,335) 217,749 $ 1.35 $ 1.20 $ 0.495 $ 161,436,449 199,739,326 171,851,061 176,292,802 0.30 $ 0.30 $ 0.390 $ 0.12 $ 0.11 $ (0.64) $ (0.64) $ — 41,413,339 41,413,339 (2.88) (2.88) — 28,704,876 28,704,876 0.130 146,504,055 148,339,378 In thousands of U.S. dollars Balance sheet data Cash and cash equivalents .............................. $ Vessels and drydock ....................................... Vessels under construction ............................. Total assets ..................................................... Current and non-current debt (3) ...................... Shareholders’ equity ....................................... In thousands of U.S. dollars Cash flow data Net cash inflow/(outflow) Operating activities ......................................... $ Investing activities .......................................... Financing activities ......................................... 2015 2014 As of December 31, 2013 2012 2011 200,970 $ 116,143 $ 1,971,878 404,877 2,804,643 1,571,522 1,162,848 78,845 530,270 649,526 1,646,676 167,129 1,450,723 $ 87,165 $ 395,412 50,251 573,280 142,459 414,790 For the year ended December 31, 2013 2014 2012 3,087,753 132,218 3,523,455 2,049,989 1,413,885 2015 36,833 322,458 60,333 448,230 145,568 286,853 2011 391,975 $ (703,418) 396,270 93,916 $ (5,655) $ (1,158,234) 1,101,616 (935,101) 932,436 (1,928) $ (90,155) 142,415 (12,452) (122,573) 103,671 (1) In the year ended December 31, 2011, we recorded an impairment charge of $66.6 million for 12 owned vessels. 2 (2) Basic earnings per share is calculated by dividing the net income/(loss) attributable to equity holders of the parent by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by adjusting the net income/(loss) attributable to equity holders of the parent and the weighted average number of common shares used for calculating basic earnings per share for the effects of all potentially dilutive shares. Such potentially dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share. (3) Current and non-current debt as of December 31, 2015, 2014, 2013, 2012 and 2011 is shown net of deferred financing fees of $55.8 million, $47.1 million, $2.4 million, $3.5 million and $5.3 million, respectively. The following table sets forth our other operating data. This data should be read in conjunction with “Item 5. Operating and Financial Review and Prospects.” Average Daily Results Time charter equivalent per day(1) .......... Vessel operating costs per day(2) ............. Aframax/LR2 TCE per revenue day (1) .......................... Vessel operating costs per day(2) ............. Panamax/LR1 TCE per revenue day (1) ........................... Vessel operating costs per day(2) ............. MR TCE per revenue day (1) .......................... Vessel operating costs per day(2) ............. Handymax TCE per revenue day (1) .......................... Vessel operating costs per day(2) ............. Fleet data Average number of owned vessels (3) ..... Average number of time chartered-in vessels (3) .............................................. Drydock Expenditures for drydock (in thousands of U.S. dollars) .................................... 2015 For the year ended December 31, 2012 2013 2014 2011 $ 23,163 6,564 $ 15,935 6,802 $ 14,369 6,781 $ 12,960 7,605 $ 12,898 7,581 30,544 6,865 21,804 8,440 21,803 6,461 19,686 6,473 72.70 16.90 18,621 6,789 16,857 8,332 15,297 6,580 14,528 6,704 31.60 26.30 12,718 8,203 12,599 7,756 16,546 6,069 12,862 6,852 15.94 22.85 10,201 8,436 14,264 7,714 12,289 6,770 13,069 7,594 10.81 9.18 14,951 6,960 14,743 7,891 12,092 6,748 11,343 7,619 11.29 4.95 $ — $ 1,290 $ — $ 2,869 $ 2,624 (1) Freight rates are commonly measured in the shipping industry in terms of time charter equivalent, or TCE, per revenue day. Vessels in the pool and on time charter do not incur significant voyage expenses; therefore, the revenue for pool vessels and time charter vessels is the same as their TCE revenue. Please see “Item 5. Operating and Financial Review and Prospects- Important Financial and Operational Terms and Concepts” for a discussion of TCE revenue, revenue days and voyage expenses. (2) Vessel operating costs per day represent vessel operating costs, as such term is defined in “Item 5. Operating and Financial Review and Prospects-Important Financial and Operational Terms and Concepts,” divided by the number of days the vessel is owned during the period. (3) For a definition of items listed under “Fleet Data,” please see the section of this annual report entitled “Item 5. Operating and Financial Review and Prospects.” B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. 3 D. Risk Factors The following risks relate principally to the industry in which we operate and our business in general. Other risks relate principally to the securities market and ownership of our securities. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results or cash available for the payment of dividends on our common shares and interest on our debt securities, or the trading price of our securities. RISKS RELATED TO OUR INDUSTRY The tanker industry is cyclical and volatile, which may adversely affect our earnings and available cash flow. The tanker industry is both cyclical and volatile in terms of charter rates and profitability. A worsening of current global economic conditions may cause tanker charter rates to decline and thereby adversely affect our ability to charter or re- charter our vessels or to sell them on the expiration or termination of their charters, and the rates payable in respect of our vessels currently operating in tanker pools, or any renewal or replacement charters that we enter into, may not be sufficient to allow us to operate our vessels profitably. Fluctuations in charter rates and vessel values result from changes in the supply and demand for tanker capacity and changes in the supply and demand for oil and oil products. The factors affecting the supply and demand for tankers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. The factors that influence demand for tanker capacity include: • supply and demand for energy resources and oil and petroleum products; • regional availability of refining capacity and inventories; • global and regional economic and political conditions, including armed conflicts, terrorist activities, and strikes; • the distance over which oil and oil products are to be moved by sea; • changes in seaborne and other transportation patterns; • environmental and other legal and regulatory developments; • weather and natural disasters; • competition from alternative sources of energy; and • international sanctions, embargoes, import and export restrictions, nationalizations and wars. The factors that influence the supply of tanker capacity include: • supply and demand for energy resources and oil and petroleum products; • the number of newbuilding orders and deliveries, including slippage in deliveries; • the number of shipyards and ability of shipyards to deliver vessels; • the scrapping rate of older vessels; • conversion of tankers to other uses; • the number of product tankers trading crude or “dirty” oil products (such as fuel oil); • the number of vessels that are out of service, namely those that are laid up, drydocked, awaiting repairs or otherwise not available for hire; • environmental concerns and regulations; • product imbalances (affecting the level of trading activity); 4 • developments in international trade, including refinery additions and closures; • port or canal congestion; and • speed of vessel operation. In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up, include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age profile of the existing tanker fleet in the market, and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions. We anticipate that the future demand for our tankers will be dependent upon economic growth in the world’s economies, seasonal and regional changes in demand, changes in the capacity of the global tanker fleet and the sources and supply of oil and petroleum products to be transported by sea. Given the number of new tankers currently on order with the shipyards, the capacity of the global tanker fleet seems likely to increase and there can be no assurance as to the timing or extent of future economic growth. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results. We are dependent on spot-oriented pools and spot charters and any decrease in spot charter rates in the future may adversely affect our earnings. As of March 17, 2016, all except six of our vessels were employed in either the spot market or in spot market- oriented tanker pools, such as the SLR2P, SPTP, SMRP or SHTP, which we refer to collectively as the Scorpio Group Pools and which are managed by companies, which are members of the Scorpio Group, exposing us to fluctuations in spot market charter rates. The spot charter market may fluctuate significantly based upon tanker and oil supply and demand. The successful operation of our vessels in the competitive spot charter market, including within the Scorpio Group Pools, depends on, among other things, obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. The spot market is very volatile, and, in the past, there have been periods when spot charter rates have declined below the operating cost of vessels. If future spot charter rates decline, then we may be unable to operate our vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or pay dividends in the future. Furthermore, as charter rates for spot charters are fixed for a single voyage which may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing the benefits from such increases. Our ability to renew expiring charters or obtain new charters will depend on the prevailing market conditions at the time. If we are not able to obtain new charters in direct continuation with existing charters or upon taking delivery of a newly acquired vessel, or if new charters are entered into at charter rates substantially below the existing charter rates or on terms otherwise less favorable compared to existing charter terms, our revenues and profitability could be adversely affected. An over-supply of tanker capacity may lead to a reduction in charter rates, vessel values, and profitability. The market supply of tankers is affected by a number of factors, such as supply and demand for energy resources, including oil and petroleum products, supply and demand for seaborne transportation of such energy resources, and the current and expected purchase orders for newbuildings. If the capacity of new tankers delivered exceeds the capacity of tankers being scrapped and converted to non-trading tankers, tanker capacity will increase. According to Drewry Shipping Consultants Ltd., or Drewry, as of February 1, 2016, the newbuilding order book, which extends to 2019 and beyond, equaled approximately 18% of the existing world tanker fleet and the order book may increase further in proportion to the existing fleet. If the supply of tanker capacity increases and if the demand for tanker capacity does not increase correspondingly or declines, charter rates could materially decline. A reduction in charter rates and the value of our vessels may have a material adverse effect on our results of operations and available cash. In addition, product tankers may be “cleaned up” from “dirty/crude” trades and swapped back into the product tanker market which would increase the available product tanker tonnage which may affect the supply and demand balance for product tankers. This could have an adverse effect on our future performance, results of operations, cash flows and financial position. 5 Acts of piracy on ocean-going vessels could adversely affect our business. Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean, Gulf of Guinea and in the Gulf of Aden. Sea piracy incidents continue to occur, with drybulk vessels and tankers particularly vulnerable to such attacks. If these piracy attacks result in regions in which our vessels are deployed being characterized by insurers as “war risk” zones by insurers or Joint War Committee “war and strikes” listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including costs which may be incurred to the extent we employ onboard security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, results of operations, cash flows and financial condition and may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters. Changes in fuel, or bunkers, prices may adversely affect our profits. Fuel, or bunkers, is typically the largest expense in our shipping operations for our vessels and changes in the price of fuel may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of the Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may adversely affect the competitiveness of our business compared to other forms of transportation and reduce our profitability. Tanker rates also fluctuate based on seasonal variations in demand. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance that is typically conducted in the summer months. In addition, unpredictable weather patterns during the winter months in the northern hemisphere tend to disrupt vessel routing and scheduling. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months. As a result, revenues generated by our vessels have historically been weaker during the quarters ended June 30 and September 30, and stronger in the quarters ended March 31 and December 31. A shift in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products may have a material adverse effect on our business. A significant portion of our earnings are related to the oil industry. A shift in the consumer demand from oil towards other energy resources such as wind energy, solar energy, or water energy will potentially affect the demand for our product tankers. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position. Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources of production, locations of consumption, pricing differentials and seasonality. Changes to the trade patterns of refined oil products may have a significant negative or positive impact on the ton-mile and therefore the demand for our product tankers. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position. We may be required to make significant investments in ballast water management which may have a material adverse effect on our future performance, results of operations, and financial position. The International Convention for the Control and Management of Vessels’ Ballast Water and Sediments, or the BWM Convention, aims to prevent the spread of harmful aquatic organisms from one region to another, by establishing standards and procedures for the management and control of ships’ ballast water and sediments. The BWM Convention calls for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits. To date, the BWM Convention has not been ratified. Once ratified, it is expected that ballast water treatment systems will be required to be installed on vessels at the first renewal survey following the entry into force of this convention. Please see our discussion of the International Maritime Organization in Item 4 of this annual report for further discussion on the BWM Convention. Investments in ballast water treatment equipment may have a material adverse effect on our future performance, results of operations, cash flows, financial condition and available cash. 6 An inability to effectively time investments in and divestments of vessels could prevent the implementation of our business strategy and negatively impact our results of operations and financial condition. Our strategy is to own and operate a fleet large enough to provide global coverage, but no larger than what the demand for our services can support over a longer period by both contracting newbuildings and through acquisitions and disposals in the second-hand market. Our business is greatly influenced by the timing of investments and/or divestments and contracting of newbuildings. If we are unable able to identify the optimal timing of such investments, divestments or contracting of newbuildings in relation to the shipping value cycle due to capital restraints, this could have a material adverse effect on our competitive position, future performance, results of operations, cash flows and financial position. If economic conditions throughout the world continue to be volatile, it could impede our operations. Negative trends in the global economy that emerged in 2008 continue to adversely affect global economic conditions. In addition, the world economy continues to face a number of new challenges, including the effects of lower oil prices, continuing turmoil and hostilities in the Middle East, North Africa, and other geographic areas and countries, continuing economic weakness in the European Union and softening growth in China. There has historically been a strong link between the development of the world economy and demand for energy, including oil and gas. While the recent slow- down in China’s economy has been without significant immediate impact on product tanker freight rates, an extended period of deterioration in the outlook for the world economy could reduce the overall demand for oil and gas and for our services. Such changes could adversely affect our future performance, results of operations, cash flows and financial position. The economies of the United States, the European Union and other parts of the world continue to experience relatively slow growth and exhibit weak economic trends. The credit markets in the United States and Europe have experienced significant contraction, de-leveraging and reduced liquidity, and the U.S. federal government and state governments and European authorities continue to implement a broad variety of governmental action and/or new regulation of the financial markets. Global financial markets and economic conditions have been, and continue to be, severely disrupted and volatile. We face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors. We cannot predict how long the current market conditions will last. However, these recent and developing economic and governmental factors may have a material adverse effect on our results of operations and financial condition and may cause the price of our common shares to decline. Continued economic slowdown in the Asia Pacific region, particularly in China, may exacerbate the effect on us. Before the global economic financial crisis that began in 2008, China had one of the world’s fastest growing economies in terms of GDP, which had a significant impact on shipping demand. According to the International Monetary Fund, the growth rate of China’s GDP decreased to approximately 6.9% for the year ended December 31, 2015 and is expected to decrease to 6.3% for the year ended December 31, 2016, which is China’s lowest growth rate for the past five years, and continues to remain below pre-2008 levels. While the recent slow-down in China’s economy has been without significant immediate impact on product tanker freight rates, it is possible that China and other countries in the Asia Pacific region will continue to experience slowed or even negative economic growth in the near future. Moreover, the current economic slowdown in the economies of the United States, the European Union and other Asian countries may further adversely affect economic growth in China and elsewhere. Our business, financial condition and results of operations, ability to pay dividends, if any, as well as our future prospects, may be materially adversely affected by a further economic downturn in any of these countries. If we cannot meet our customers’ quality and compliance requirements we may not be able to operate our vessels profitably which could have an adverse effect on our future performance, results of operations, cash flows and financial position. Customers, and in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their suppliers across the entire value chain, including the shipping and transportation segment. Our continuous compliance with these standards and quality requirements is vital for our operations. Related risks could materialize in multiple ways, including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels, a continuous decrease in the quality concerning one or more vessels occurring over time. Moreover, continuous increasing requirements from oil industry constituents can further complicate our ability to meet the standards. Any noncompliance by us, either suddenly or over a period of time, on one or more vessels, or an increase in requirements by oil operators above and beyond what we delivers, may have a material adverse effect on our future performance, results of operations, cash flows and financial position. 7 We are subject to complex laws and regulations, including environmental laws and regulations that can adversely affect our business, results of operations, cash flows and financial condition, and our available cash. Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, requirements of the U.S. Coast Guard and the U.S. Environmental Protection Agency, or EPA, the U.S. Clean Air Act, U.S. Clean Water Act, or the CWA and the U.S. Marine Transportation Security Act of 2002, European Union Regulation, and regulations of the International Maritime Organization, or the IMO, including the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time amended and generally referred to as MARPOL including the designation of Emission Control Areas, or ECAs, thereunder, the IMO International Convention for the Safety of Life at Sea of 1974, as from time to time amended and generally referred to as SOLAS, the International Convention on Load Lines of 1966, as from time to time amended, or the LL Convention, the International Convention of Civil Liability for Oil Pollution Damage of 1969, as from time to time amended and generally referred to as CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage, and the International Ship and Port Facility Security Code. Compliance with such laws and regulations, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions including greenhouse gases, the management of ballast and bilge waters, maintenance and inspection, elimination of tin-based paint, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. For example, the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, adopted by the UN International Maritime Organization in February 2004, calls for the phased introduction of mandatory reducing living organism limits in ballast water over time. In order to comply with these living organism limits, vessel owners may have to install expensive ballast water treatment systems or make port facility disposal arrangements and modify existing vessels to accommodate those systems. Adoption of the BWM Convention standards could have an adverse material impact on our business, financial condition and results of operations depending on the available ballast water treatment systems and the extent to which existing vessels must be modified to accommodate such systems. In addition, the 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes or changes to existing laws that may affect our operations or require us to incur additional expenses to comply with such regulatory initiatives, statutes or laws. For example, in April 2015, it was announced that new regulations are expected to be imposed in the United States regarding offshore oil and gas drilling. These costs could have a material adverse effect on our business, results of operations, cash flows and financial condition and our available cash. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-nautical mile exclusive economic zone around the United States (unless the spill results solely from, under certain limited circumstances, the act or omission of a third party, an act of God or an act of war). An oil spill could result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages under other international and U.S. federal, state and local laws, as well as third-party damages, including punitive damages, and could harm our reputation with current or potential charterers of our tankers. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows and financial condition and available cash. If we fail to comply with international safety regulations, we may be subject to increased liability, which may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports. The operation of our vessels is affected by the requirements set forth in the IMO’s International Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code, promulgated by the IMO under SOLAS. The ISM Code requires the party with operational control of a vessel to develop and maintain an extensive “Safety Management System” that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. If we fail to comply with the ISM Code, we may be subject to increased liability, may invalidate existing insurance or decrease available insurance coverage for our affected vessels and such failure may result in a denial of access to, or detention in, certain ports. 8 We operate tankers worldwide, and as a result, we are exposed to inherent operational and international risks, which may adversely affect our business and financial condition. The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes will be at risk of being damaged or lost because of events such as marine disasters, bad weather, and other acts of God, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues or property, payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships, market disruptions, and interference with shipping routes (such as delay or rerouting), which may reduce our revenue or increase our expenses and also subject us to litigation. In addition, the operation of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant environmental damage, and the associated costs could exceed the insurance coverage available to us. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil transported in tankers. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located to our vessels’ positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely affect our business and financial condition. Further, the total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs, or loss which could negatively impact our business, financial condition, results of operations and available cash. Increased inspection procedures could increase costs and disrupt our business. International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures can result in the seizure of the cargo and/or our vessels, delays in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us. It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash. Political instability, terrorist or other attacks, war or international hostilities can affect the tanker industry, which may adversely affect our business. We conduct most of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and available cash may be adversely affected by the effects of political instability, terrorist or other attacks, war or international hostilities. Continuing conflicts and recent developments in North Korea, Russia, and the Middle East, including Iraq, Syria, Egypt, and North Africa, including Libya, and the presence of the United States and other armed forces in these regions may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further world economic instability and uncertainty in global financial markets. As a result of the above, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist acts generally. Future terrorist attacks could result in increased volatility of the financial markets and negatively impact the U.S. and global economy. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected vessels trading in regions such as the South China Sea, the Gulf of Guinea off the coast of West Africa, and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our business, results of operations, cash flows, financial condition and available cash. 9 If our vessels call on ports located in countries that are subject to sanctions and embargos imposed by the U.S. or other governments, our reputation and the market for our securities may be adversely affected. Although no vessels owned or operated by us have called on ports located in countries subject to sanctions and embargoes imposed by the U.S. government and other authorities or countries identified by the U.S. government or other authorities as state sponsors of terrorism, such as Cuba, Iran, Sudan, and Syria, in the future, our vessels may call on ports in these countries from time to time on charterers’ instructions. Sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act, or CISADA, which expanded the scope of the Iran Sanctions Act. Among other things, CISADA expands the application of the prohibitions of companies, such as ours, and introduces limits on the ability of companies and persons to do business or trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products. In 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. Any persons found to be in violation of Executive Order 13608 will be deemed a foreign sanctions evader and will be banned from all contacts with the United States, including conducting business in US dollars. Also in 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran Threat Reduction Act, which created new sanctions and strengthened existing sanctions. Among other things, the Iran Threat Reduction Act intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Iran’s petroleum or petrochemical sector. The Iran Threat Reduction Act also includes a provision requiring the President of the United States to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport crude oil from Iran to another country and (1) if the person is a controlling beneficial owner of the vessel, the person had actual knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person knew or should have known the vessel was so used. Such a person could be subject to a variety of sanctions, including exclusion from U.S. capital markets, exclusion from financial transactions subject to U.S. jurisdiction, and exclusion of that person’s vessels from U.S. ports for up to two years. On November 24, 2013, the P5+1 (the United States, United Kingdom, Germany, France, Russia and China) entered into an interim agreement with Iran entitled the “Joint Plan of Action,” or the JPOA. Under the JPOA it was agreed that, in exchange for Iran taking certain voluntary measures to ensure that its nuclear program is used only for peaceful purposes, the U.S. and E.U. would voluntarily suspend certain sanctions for a period of six months. On January 20, 2014, the U.S. and E.U. indicated that they would begin implementing the temporary relief measures provided for under the JPOA. These measures included, among other things, the suspension of certain sanctions on the Iranian petrochemicals, precious metals, and automotive industries from January 20, 2014 until July 20, 2014. The JPOA was subsequently extended twice. On July 14, 2015, the P5+1 and the EU announced that they reached a landmark agreement with Iran titled the Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program, or the JCPOA, which is intended to significantly restrict Iran’s ability to develop and produce nuclear weapons for 10 years while simultaneously easing sanctions directed toward non-U.S. persons for conduct involving Iran, but taking place outside of U.S. jurisdiction and does not involve U.S. persons. On January 16, 2016, which we refer to as Implementation Day, the United States joined the EU and the UN in lifting a significant number of their nuclear-related sanctions on Iran following an announcement by the International Atomic Energy Agency, or the IAEA, that Iran had satisfied its respective obligations under the JCPOA. Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our securities may adversely affect the price at which our securities trade. Additionally, some investors may decide to divest their interest, or not to invest, in our company simply because we do business with companies that do business in sanctioned countries. Moreover, our charterers may violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other activities, such as entering into charters with individuals or entities in countries subject to U.S. sanctions and embargo laws that are not controlled by the governments of those countries, or 10 engaging in operations associated with those countries pursuant to contracts with third parties that are unrelated to those countries or entities controlled by their governments. Investor perception of the value of our securities may also be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in these and surrounding countries. The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us. We expect that our vessels will call in ports where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Maritime claimants could arrest or attach our vessels, which would have a negative effect on our cash flows. Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders, and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our business or require us to pay large sums of money to have the arrest lifted, which would have a negative effect on our cash flows. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet for claims relating to another of our ships. Governments could requisition our vessels during a period of war or emergency, which may negatively impact our business, financial condition, results of operations and available cash. A government could requisition one or more of our vessels for title or hire. Requisition for title occurs when a government takes control of a vessel and becomes the owner. Also, a government could requisition our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels may negatively impact our business, financial condition, results of operations and available cash. Technological innovation could reduce our charterhire income and the value of our vessels. The charterhire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new tankers are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charterhire payments we receive for our vessels and the resale value of our vessels could significantly decrease. As a result, our available cash could be adversely affected. If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash. We, indirectly through Scorpio Ship Management S.A.M., or SSM, our technical manager, employ masters, officers and crews to man our vessels. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out as we expect and could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash. RISKS RELATED TO OUR COMPANY Newbuilding projects are subject to risks that could cause delays, cost overruns or cancellation of our newbuilding contracts. 11 As of March 17, 2016, we were party to newbuilding contracts with HMD, DHSC, and SSME for the construction of 12 newbuilding vessels, of which four are expected to be delivered to us to us during 2016 (one per quarter) and eight vessels are expected to be delivered to us during 2017. As of the same date, we have made total yard payments with respect to these vessels in the amount of $172.6 million. We are obligated to pay remaining yard installments in the amount of $318.9 million before we take possession of all of these vessels. If we fail to make any or all of these installment payments, we may not take delivery of these vessels and we may forfeit all or a portion of the down payments we have already made under such contracts, and we may be sued for, among other things, any outstanding balances we are obligated to pay and other damages. The delivery of such vessels or vessels that we may acquire in the future could be delayed, not completed or cancelled, which would delay or eliminate our expected receipt of revenues from the employment of such vessels. In addition, the yards or a seller could fail to deliver vessels to us as agreed, or we could cancel a purchase contract because such yard or seller has not met its obligations. If the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter for which we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, our business, financial condition and results of operations could be adversely affected. In addition, in the event that any or all of HMD, DHSC, or SSME do not perform under their contracts and we are unable to enforce certain refund guarantees with third party banks for any reason, we may lose all or part of our investment, which would have a material adverse effect on our results of operations, financial condition and cash flows. Please also see “- We are subject to certain risks with respect to our counterparties on contracts, including our chartering arrangements and newbuilding contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.” We cannot assure you that our internal controls and procedures over financial reporting will be sufficient. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley. Section 404 of Sarbanes-Oxley requires that we evaluate and determine the effectiveness of our internal controls over financial reporting. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We dedicate a significant amount of time and resources to ensure compliance with these regulatory requirements. We will continue to evaluate areas such as corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We will make changes in any of these and other areas, including our internal control over financial reporting, which we believe are necessary. However, these and other measures we may take may not be sufficient to allow us to satisfy our obligations as a public company on a timely and reliable basis. We may have difficulty managing our planned growth properly. We may continue to grow by expanding our operations and adding to our fleet. Our future growth will primarily depend upon a number of factors, some of which may not be within our control, including our ability to effectively identify, purchase, finance, develop and integrate any tankers or businesses. Furthermore, the number of employees that perform services for us and our current operating and financial systems may not be adequate as we expand the size of our fleet, and we may not be able to effectively hire more employees or adequately improve those systems. Finally, acquisitions may require additional equity issuances or debt issuances (with amortization payments), both of which could lower our available cash. If any such events occur, our business, financial condition and results of operations may be adversely affected and the amount of cash available for distribution as dividends to our shareholders may be reduced. Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. The expansion of our fleet may impose significant additional responsibilities on our management and staff, and the management and staff of our commercial and technical managers, and may necessitate that we, and they, increase the number of personnel. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth. 12 If we purchase and operate secondhand vessels, we will be exposed to increased operating costs which could adversely affect our earnings and, as our fleet ages, the risks associated with older vessels could adversely affect our ability to obtain profitable charters. Our current business strategy includes potential growth through the acquisition of new and secondhand vessels. To the extent we decide to purchase secondhand vessels, we would be entitled to inspect them prior to purchase and this would not provide us with the same knowledge about their condition that we would have had if these vessels had been built for and operated exclusively by us. Generally, we do not receive the benefit of warranties from the builders for the secondhand vessels that we acquire. In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, safety or other equipment standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which the vessels may engage. As our vessels age, market conditions may not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. An increase in operating costs would decrease earnings and available cash. Under time charter agreements, the charterer is responsible for voyage costs and the owner is responsible for the vessel operating costs. We currently have six vessels on long-term time charter-out agreements (with initial terms of one year or greater) and 11 vessels on time or bareboat charter-in agreements. When our owned vessels are employed under one of the Scorpio Group Pools, the pool is responsible for voyage expenses and we are responsible for vessel costs. As of March 17, 2016, 72 of our owned vessels and all of our time or bareboat chartered-in vessels were employed through the Scorpio Group Pools. When our vessels operate in the spot market, we are responsible for both voyage expenses and vessel operating costs. We did not have any vessels operating directly in the spot market as of March 17, 2016. Our vessel operating costs include the costs of crew, fuel (for spot chartered vessels), provisions, deck and engine stores, insurance and maintenance and repairs, which depend on a variety of factors, many of which are beyond our control. Further, if our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydocking repairs are unpredictable and can be substantial. Increases in any of these expenses would decrease earnings and available cash. Please see “-We will be required to make additional capital expenditures to expand the number of vessels in our fleet and to maintain all our vessels, which will be dependent on additional financing.” We will be required to make additional capital expenditures to expand the number of vessels in our fleet and to maintain all our vessels. Our business strategy is based in part upon the expansion of our fleet through the purchase of additional vessels. If we are unable to fulfill our obligations under any memorandum of agreement for future vessel acquisitions, the sellers of such vessels may be permitted to terminate such contracts and we may forfeit all or a portion of the down payments we have already made under such contracts, and we may be sued for, among other things, any outstanding balances we are obligated to pay and other damages. In addition, we will incur significant maintenance costs for our existing and any newly-acquired vessels. A newbuilding vessel must be drydocked within five years of its delivery from a shipyard, and vessels are typically drydocked every 30 months thereafter, not including any unexpected repairs. We estimate the cost to drydock a vessel to be between $500,000 and $1,000,000, depending on the size and condition of the vessel and the location of drydocking. If we do not generate or reserve enough cash flow from operations to pay for our capital expenditures, we may need to incur additional indebtedness or enter into alternative financing arrangements, which may be on terms that are unfavorable to us. If we are unable to fund our obligations or to secure financing, it would have a material adverse effect on our results of operations. Declines in charter rates and other market deterioration could cause us to incur impairment charges. We evaluate the carrying amounts of our vessels to determine if events have occurred that would require an impairment of their carrying amounts. The recoverable amount of vessels is reviewed based on events and changes in circumstances that would indicate that the carrying amount of the assets might not be recovered. The review for potential impairment indicators and projection of future cash flows related to the vessels is complex and requires us to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile. 13 We evaluate the recoverable amount as the higher of fair value less costs to sell and value in use. If the recoverable amount is less than the carrying amount of the vessel, the vessel is deemed impaired. The carrying values of our vessels may not represent their fair market value at any point in time because the new market prices of secondhand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. For the year ended December 31, 2015, we evaluated the recoverable amount of our vessels and we did not recognize an impairment loss, however we recorded a $2.1 million loss as a result of the sale of STI Highlander, which was sold in October 2015. For the year ended December 31, 2014, we evaluated the recoverable amount of our vessels and we did not recognize an impairment loss, however we did record a $3.9 million write-down resulting from the designation of STI Heritage and STI Harmony as held for sale and an additional $0.1 million write-down on Venice. Venice was sold in March 2015 and STI Harmony and STI Heritage were sold in April 2015. We cannot assure you that there will not be further impairments in future years. Any additional impairment charges incurred as a result of further declines in charter rates could negatively affect our business, financial condition, operating results or the trading price of our securities. Please see “-Declines in charter rates and other market deterioration could cause us to incur impairment charges” and “Item 5. Operating and Financial Review and Prospects-Critical Accounting Policies-Vessel Impairment.” The market values of our vessels may decrease, which could limit the amount of funds that we can borrow or trigger certain financial covenants under our current or future debt facilities and we may incur a loss if we sell vessels following a decline in their market value. The fair market values of our vessels have generally experienced high volatility. The fair market values for tankers declined significantly from historically high levels reached in 2008, and remain at relatively low levels. Such prices may fluctuate depending on a number of factors including, but not limited to, the prevailing level of charter rates and day rates, general economic and market conditions affecting the international shipping industry, types, sizes and ages of vessels, supply and demand for vessels, availability of or developments in other modes of transportation, competition from other tanker companies, cost of newbuildings, applicable governmental or other regulations and technological advances. In addition, as vessels grow older, they generally decline in value. If the fair market values of our vessels declines, or declines further, the amount of funds we may draw down under our secured credit facilities may be limited and we may not be in compliance with certain covenants contained in our secured credit facilities, which may result in an event of default. In such circumstances, we may not be able to refinance our debt, obtain additional financing or make distributions to our shareholders and our subsidiaries may not be able to make distributions to us. The prepayment of certain debt facilities may be necessary to cause us to maintain compliance with certain covenants in the event that the value of the vessels falls below certain levels. If we are not able to comply with the covenants in our secured credit facilities, and are unable to remedy the relevant breach, our lenders could accelerate our debt and foreclose on our fleet. Additionally, if we sell one or more of our vessels at a time when vessel prices have fallen, the sale price may be less than the vessel’s carrying value on our consolidated financial statements, resulting in a loss on sale or an impairment loss being recognized, ultimately leading to a reduction in earnings. Furthermore, if vessel values fall significantly, this could indicate a decrease in the recoverable amount for the vessel which may result in an impairment adjustment in our financial statements, which could adversely affect our financial results and condition. For further information, please see “Item 5. Operating and Financial Review and Prospects.” If we are unable to operate our vessels profitably, we may be unsuccessful in competing in the highly competitive international tanker market, which would negatively affect our financial condition and our ability to expand our business. The operation of tanker vessels and transportation of crude and petroleum products is extremely competitive, in an industry that is capital intensive and highly fragmented. Demand for transportation of oil and oil products has declined, and could continue to decline, which could lead to increased competition. Competition arises primarily from other tanker owners, including major oil companies as well as independent tanker companies, some of whom have substantially greater resources than we do. Competition for the transportation of oil and oil products can be intense and depends on price, location, size, age, condition and the acceptability of the tanker and its operators to the charterers. We will have to compete with other tanker owners, including major oil companies as well as independent tanker companies. Our market share may decrease in the future. We may not be able to compete profitably as we expand our business into new geographic regions or provide new services. New markets may require different skills, knowledge or strategies than we use in our current markets, and the competitors in those new markets may have greater financial strength and capital resources than we do. 14 If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, at the end of a vessel’s useful life our revenue will decline, which would adversely affect our business, results of operations, financial condition, and available cash. If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon the expiration of their remaining useful lives, which we expect to occur between 2036 and 2041, depending on the vessel. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels. If we are unable to replace the vessels in our fleet upon the expiration of their useful lives, our business, results of operations, financial condition, and available cash per share would be adversely affected. Any funds set aside for vessel replacement will reduce available cash. Our ability to obtain additional financing may be dependent on the performance of our then existing charters and the creditworthiness of our charterers. The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing at all or at a higher than anticipated cost may materially affect our results of operations and our ability to implement our business strategy. We cannot guarantee that our Board of Directors will declare dividends. Our Board of Directors may, in its sole discretion, from time to time, declare and pay cash dividends in accordance with our organizational documents and applicable law. Our Board of Directors makes determinations regarding the payment of dividends in its sole discretion, and there is no guarantee that we will continue to pay dividends in the future. In addition, the markets in which we operate our vessels are volatile and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. We may also incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein. If additional financing is not available to us on acceptable terms, our Board of Directors may determine to finance or refinance asset acquisitions with cash from operations, which would reduce the amount of any cash available for the payment of dividends. United States tax authorities could treat us as a “passive foreign investment company,” which could have adverse United States federal income tax consequences to United States shareholders. A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” United States shareholders of a PFIC are subject to a disadvantageous United States federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. Based on our current and proposed method of operation, we do not believe that we will be a PFIC with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, our income from our time and voyage chartering activities should not constitute “passive income,” and the assets that we own and operate in connection with the production of that income should not constitute assets that produce or are held for the production of “passive income.” There is substantial legal authority supporting this position, consisting of case law and United States Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, it should be noted that there is also authority that characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations change. 15 If the IRS were to find that we are or have been a PFIC for any taxable year, our United States shareholders would face adverse United States federal income tax consequences and incur certain information reporting obligations. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986, as amended, or the Code (which election could itself have adverse consequences for such shareholders), such shareholders would be subject to United States federal income tax at the then prevailing rates on ordinary income plus interest, in respect of excess distributions and upon any gain from the disposition of their common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of the common shares. See “Taxation-Passive Foreign Investment Company Status and Significant Tax Consequences” for a more comprehensive discussion of the United States federal income tax consequences to United States shareholders if we are treated as a PFIC. We may have to pay tax on United States source shipping income, which would reduce our earnings. Under the Code, 50% of the gross shipping income of a corporation that owns or charters vessels, as we and our subsidiaries do, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the regulations promulgated thereunder by the United States Department of the Treasury. We and our subsidiaries intend to take the position that we qualify for this statutory tax exemption for United States federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to United States federal income tax on our United States source shipping income. For example, we may no longer qualify for exemption under Section 883 of the Code for a particular taxable year if shareholders with a five percent or greater interest in our common shares, or 5% Shareholders, owned, in the aggregate, 50% or more of our outstanding common shares for more than half the days during the taxable year, and there do not exist sufficient 5% Shareholders that are qualified shareholders for purposes of Section 883 of the Code to preclude nonqualified 5% Shareholders from owning 50% or more of our common shares for more than half the number of days during such taxable year or we are unable to satisfy certain substantiation requirements with regard to our 5% Shareholders. Due to the factual nature of the issues involved, there can be no assurances on the tax-exempt status of us or any of our subsidiaries. If we or our subsidiaries were not entitled to exemption under Section 883 of the Code for any taxable year, we or our subsidiaries could be subject for such year to an effective 2% United States federal income tax on the shipping income we or they derive during such year which is attributable to the transport of cargoes to or from the United States. The imposition of this tax would have a negative effect on our business and would decrease our earnings available for distribution to our shareholders. We are subject to certain risks with respect to our counterparties on contracts, including, without limitation, our vessel employment arrangements and newbuilding contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows. We have entered into, and may enter in the future, various contracts, including, without limitation, charter and pooling agreements relating to the employment of our vessels, newbuilding contracts, debt facilities, and other agreements. Such agreements subject us to counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty. In addition, with respect to our charter arrangements, in depressed market conditions, our charterers may no longer need a vessel that is then under charter or may be able to obtain a comparable vessel at lower rates. As a result, charterers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure in the spot market or on time charters may be at lower rates. As a result, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends on our common shares and interest on our debt securities and comply with covenants in our credit facilities. 16 Our insurance may not be adequate to cover our losses that may result from our operations due to the inherent operational risks of the tanker industry. We carry insurance to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, which include pollution risks, crew insurance and war risk insurance. However, we may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on us. Additionally, our insurers may refuse to pay particular claims and our insurance may be voidable by the insurers if we take, or fail to take, certain action, such as failing to maintain certification of our vessels with applicable maritime regulatory organizations. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations, cash flows and financial condition and our available cash. In addition, we may not be able to obtain adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions. Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult for us to obtain due to increased premiums or reduced or restricted coverage for losses caused by terrorist acts generally. Because we obtain some of our insurance through protection and indemnity associations, which result in significant expenses to us, we may be required to make additional premium payments. We may be subject to increased premium payments, or calls, in amounts based on our claim records, the claim records of our managers, as well as the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. In addition, our protection and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash. Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, contract terminations and an adverse effect on our business. We may operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management. We are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law and, as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States. Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Shareholder rights may differ as well. While the BCA does specifically incorporate the non- statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction. It may be difficult to serve process on or enforce a United States judgment against us, our officers and our directors because we are a foreign corporation. We are a corporation formed in the Republic of the Marshall Islands, and some of our directors and officers and certain of the experts named in this offering are located outside the United States. In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty 17 enforcing, both in and outside the United States, judgments you may obtain in U.S. courts against us or any of these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws. Furthermore, there is substantial doubt that the courts of the Republic of the Marshall Islands or of the non-U.S. jurisdictions in which our offices are located would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws. The international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict. We are incorporated under the laws of the Republic of the Marshall Islands and we conduct operations in countries around the world. Consequently, in the event of any bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding involving us or any of our subsidiaries, bankruptcy laws other than those of the United States could apply. If we become a debtor under U.S. bankruptcy law, bankruptcy courts in the United States may seek to assert jurisdiction over all of our assets, wherever located, including property situated in other countries. There can be no assurance, however, that we would become a debtor in the United States, or that a U.S. bankruptcy court would be entitled to, or accept, jurisdiction over such a bankruptcy case, or that courts in other countries that have jurisdiction over us and our operations would recognize a U.S. bankruptcy court’s jurisdiction if any other bankruptcy court would determine it had jurisdiction. RISKS RELATED TO OUR RELATIONSHIP WITH SCORPIO GROUP AND ITS AFFILIATES We are dependent on our managers and their ability to hire and retain key personnel, and there may be conflicts of interest between us and our managers that may not be resolved in our favor. Our success depends to a significant extent upon the abilities and efforts of our technical manager, SSM, our commercial manager, Scorpio Commercial Management S.A.M., or SCM, and our management team. Our success will depend upon our and our managers’ ability to hire and retain key members of our management team. The loss of any of these individuals could adversely affect our business prospects and financial condition. In addition, difficulty in hiring and retaining personnel could adversely affect our results of operations. We do not maintain “key man” life insurance on any of our officers. Our technical and commercial managers are members of the Scorpio Group, which is owned and controlled by the Lolli-Ghetti family, of which our founder, Chairman and Chief Executive Officer, Mr. Emanuele Lauro, and our Vice President, Mr. Filippo Lauro, are members. In addition, all of our executive officers serve in similar management positions in certain other companies within the Scorpio Group. These relationships may create conflicts of interest in matters involving or affecting us and our customers, including in the chartering, purchase, sale and operation of the vessels in our fleet versus vessels managed by other members of the Scorpio Group. Conflicts of interest may arise between us, on the one hand, and our commercial and technical managers, on the other hand. As a result of these conflicts, our commercial and technical managers, who have limited contractual duties, may favor their own or other owner’s interests over our interests. These conflicts may have unfavorable results for us. Our founder, Chairman and Chief Executive Officer and Vice President have affiliations with our administrator and commercial and technical managers which may create conflicts of interest. Emanuele Lauro, our founder, Chairman and Chief Executive Officer, and Filippo Lauro, our Vice President, are members of the Lolli-Ghetti family, which owns and controls our administrator and commercial and technical managers. These responsibilities and relationships could create conflicts of interest between us, on the one hand, and our administrator and/or commercial and technical managers, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus vessels managed by other companies affiliated with our commercial or technical managers. Our commercial and technical managers may give preferential treatment to vessels that are time chartered-in by related parties because our founder, Chairman and Chief Executive Officer and members of his family may receive greater economic benefits. In particular, as of the date of this annual report, our commercial and technical managers provide commercial and technical management services to approximately 100 and 44 vessels respectively, other than the vessels in our fleet, that are owned, operated or managed by entities affiliated with Mr. Lauro, and such entities may acquire additional vessels that will compete with our vessels in the future. Such conflicts may have an adverse effect on our results of operations. Certain of our officers do not devote all of their time to our business, which may hinder our ability to operate successfully. Certain of our officers participate in business activities not associated with us, and as a result, they may devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to the shareholders of both us as well as shareholders of other companies which they may be affiliated, including other companies within the Scorpio 18 Group. This may create conflicts of interest in matters involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in our favor. This could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our commercial and technical managers are each privately held companies and there is little or no publicly available information about them. SCM is our commercial manager and SSM is our technical manager. SCM’s and SSM’s ability to render management services will depend in part on their own financial strength. Circumstances beyond our control could impair our commercial manager’s or technical manager’s financial strength, and because each is a privately held company, information about the financial strength of our commercial manager and technical manager is not available. As a result, we and our shareholders might have little advance warning of financial or other problems affecting our commercial manager or technical manager even though their financial or other problems could have a material adverse effect on us. RISKS RELATED TO OUR INDEBTEDNESS Servicing our current or future indebtedness limits funds available for other purposes and if we cannot service our debt, we may lose our vessels. Borrowing under our debt facilities requires us to dedicate a part of our cash flow from operations to paying interest on our indebtedness. These payments limit funds available for working capital, capital expenditures and other purposes, including further equity or debt financing in the future. Amounts borrowed under our debt facilities bear interest at variable rates. Increases in prevailing rates could increase the amounts that we would have to pay to our lenders, even though the outstanding principal amount remains the same, and our net income and cash flows would decrease. We expect our earnings and cash flow to vary from year to year due to the cyclical nature of the tanker industry. If we do not generate or reserve enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as seeking to raise additional capital, refinancing or restructuring our debt, selling tankers, or reducing or delaying capital investments. However, these alternative financing plans, if necessary, may not be sufficient to allow us to meet our debt obligations. If we are unable to meet our debt obligations or if some other default occurs under our debt facilities, our lenders could elect to declare that debt, together with accrued interest and fees, to be immediately due and payable and proceed against the collateral vessels securing that debt even though the majority of the proceeds used to purchase the collateral vessels did not come from our debt facilities. Our debt agreements contain restrictive and financial covenants which may limit our ability to conduct certain activities, and further, we may be unable to comply with such covenants, which could result in a default under the terms of such agreements. Our debt facilities impose operating and financial restrictions on us. These restrictions may limit our ability, or the ability of our subsidiaries party thereto to, among other things: • pay dividends and make capital expenditures if we do not repay amounts drawn under our debt facilities or if there is another default under our debt facilities; incur additional indebtedness, including the issuance of guarantees; create liens on our assets; change the flag, class or management of our vessels or terminate or materially amend the management agreement relating to each vessel; • • • • sell our vessels; • merge or consolidate with, or transfer all or substantially all our assets to, another person; or • enter into a new line of business. Therefore, we will need to seek permission from our lenders in order to engage in some corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain our lenders’ permission when needed. This may limit our ability to pay dividends to you if we determine to do so in the future, finance our future operations or capital requirements, make acquisitions or pursue business opportunities. 19 In addition, our secured credit facilities require us to maintain specified financial ratios and satisfy financial covenants, including ratios and covenants based on the market value of the vessels in our fleet. Should our charter rates or vessel values materially decline in the future, we may seek to obtain waivers or amendments from our lenders with respect to such financial ratios and covenants, or we may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to meet any such financial ratios and satisfy any such financial covenants. Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy these covenants or that our lenders will waive any failure to do so or amend these requirements. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our credit facilities would prevent us from borrowing additional money under our credit facilities and could result in a default under our credit facilities. If a default occurs under our credit facilities, the lenders could elect to declare the outstanding debt, together with accrued interest and other fees, to be immediately due and payable and foreclose on the collateral securing that debt, which could constitute all or substantially all of our assets. Moreover, in connection with any waivers or amendments to our credit facilities that we may obtain, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, repurchase our common shares, make capital expenditures, or incur additional indebtedness. Furthermore, our debt agreements contain cross-default provisions that may be triggered if we default under the terms of any one of our financing agreements. In the event of default by us under one of our debt agreements, the lenders under our other debt agreements could determine that we are in default under such other financing agreements. Such cross defaults could result in the acceleration of the maturity of such debt under these agreements and the lenders thereunder may foreclose upon any collateral securing that debt, including our vessels, even if we were to subsequently cure such default. In the event of such acceleration or foreclosure, we might not have sufficient funds or other assets to satisfy all of our obligations, which would have a material adverse effect on our business, results of operations and financial condition. ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands pursuant to the BCA on July 1, 2009. We provide seaborne transportation of refined petroleum products worldwide. We began our operations in October 2009 with three vessels and in April 2010, we completed our initial public offering and commenced trading on the New York Stock Exchange, or NYSE, under the symbol “STNG.” We have since expanded our fleet and as of March 17, 2016, our fleet consisted of 78 wholly owned tankers (18 LR2 tankers, 14 Handymax tankers and 46 MR tankers) with a weighted average age of approximately 1.5 years, and 11 time chartered-in tankers which we operate (three LR2 tankers, one LR1 tanker, four MR tankers and three Handymax tankers), which we refer to collectively as our Operating Fleet. In addition, we currently have contracts for the construction of 12 newbuilding product tankers (eight MR tankers and four LR2 tankers), which we refer to as our Newbuilding Program. Of the vessels in our Newbuilding Program, four LR2s are expected to be delivered to us in the first, second, third and fourth quarters of 2016 and the eight MRs are expected to be delivered to us during 2017. We have also reached an agreement to sell four 2014 built MR product tankers for aggregate proceeds of $133.2 million. These sales are expected to close by June 2016. Our principal executive offices are located at 9, Boulevard Charles III, Monaco 98000 and our telephone number at that address is +377-9798-5716. Fleet Development For information regarding the development of our fleet, including vessel acquisitions and dispositions and the status of our Newbuilding Program, please see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Capital Expenditures-Vessel Acquisitions and Dispositions.” 2015 Sale of Investment in Dorian LPG Ltd. In July 2015, we sold our ownership interest in Dorian LPG Ltd., or “Dorian”, to two unrelated third parties for aggregate net proceeds of $142.4 million. As a result of these sales, we recognized a gain of $1.2 million during the year ended December 31, 2015. The shares representing our ownership interest were sold pursuant to an effective resale registration statement filed by Dorian on July 8, 2015. For additional information regarding the history of our investment in Dorian and related accounting treatment, please see Note 8 to our Consolidated Financial Statements included herein. 20 Other Recent Developments Credit Facilities Upsizing of ING Credit Facility In March 2016, we amended and restated our $87.0 million credit facility with ING Bank N.V. to increase the borrowing capacity to $132.5 million. The facility bears interest at LIBOR plus a margin of 1.95% per annum, and the proceeds from the increased borrowing capacity are expected to be used to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015-built). The following activity relating to our secured credit facilities has taken place during the period from January 1, 2016 through March 17, 2016: Credit Facility 1 BNP Paribas Credit Facility ........................................... 2 ING Credit Facility ........................................................ Drawdown amount (in millions of U.S. dollars) $ 17.3 26.0 Drawdown date February 2016 March 2016 Collateral STI Battery(1) STI Grace(2) (1) We refinanced the outstanding indebtedness related to the STI Battery by repaying $18.2 million into our 2013 Credit Facility in January 2016 and drawing down $17.25 million from our BNP Paribas Credit Facility in February 2016. (2) In March 2016, we drew down $26.0 million on our ING Credit Facility to partially finance the delivery of STI Grace, which is scheduled to occur on March 18, 2016. Dividend Declaration On February 25, 2016, our Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on March 30, 2016 to all shareholders of record as of March 10, 2016. Convertible Senior Notes due 2019 Effective as of March 10, 2016, we adjusted the conversion rate of our Convertible Senior Notes due 2019, or the Convertible Notes, to reflect the payment of a cash dividend of $0.125 on our common shares. The new conversion rate for the Convertible Notes is 90.5311 common shares per $1,000 principal amount of the Convertible Notes, representing an increase of the prior conversion rate of 1.8521 common shares for each $1,000 principal amount of the Convertible Notes. $250 Million Securities Repurchase Program In May 2015, our Board of Directors authorized a new Securities Repurchase Program to purchase up to an aggregate of $250 million of our common stock and bonds, which currently consist of our (i) Convertible Senior Notes Due 2019, which were issued in June 2014, (ii) Unsecured Senior Notes Due 2020 (NYSE: SBNA), which were issued in May 2014, and (iii) Unsecured Senior Notes Due 2017 (NYSE: SBNB), which were issued in October 2014. This program replaces our stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program. Since January 1, 2016 through the date of this report, we have acquired an aggregate of 2,299,606 of our common shares that are being held as treasury shares at an average price of $5.96 per share. We have $164.5 million remaining under our Securities Repurchase Program as of March 17, 2016. We expect to repurchase any securities in the open market, at times and prices that are considered to be appropriate by us, but are not obligated under the terms of the program to repurchase any securities. B. Business Overview We provide seaborne transportation of refined petroleum products and crude oil worldwide. As of March 17, 2016, our fleet consisted of 78 wholly owned tankers (18 LR2 tankers, 14 Handymax tankers and 46 MR tankers) with a weighted average age of approximately 1.5 years, and 11 time chartered-in tankers which we operate (three Handymax tankers, four MR tankers, one LR1 tanker and three LR2 tankers), which we refer to collectively as our Operating Fleet. In addition, we currently have contracts for the construction of 12 newbuilding product tankers (eight MR tankers and four LR2 tankers), 21 which we refer to as our Newbuilding Program. Of the vessels in our Newbuilding Program, the four LR2s are expected to be delivered to us in the first, second, third and fourth quarters of 2016, and the eight MRs are expected to be delivered to us during 2017. We have also reached an agreement to sell four 2014 built MR product tankers for aggregate proceeds of $133.2 million. These sales are expected to close by June 2016. The following table sets forth certain information regarding our fleet as of March 17, 2016: Vessel Name Owned vessels Year Built DWT Ice class Employment Vessel type 1 STI Brixton ....................................... 2 STI Comandante............................... 3 STI Pimlico ...................................... 4 STI Hackney ..................................... 5 STI Acton ......................................... 6 STI Fulham ....................................... 7 STI Camden ..................................... 8 STI Battersea .................................... 9 STI Wembley ................................... 10 STI Finchley ..................................... 11 STI Clapham .................................... 12 STI Poplar ........................................ 13 STI Hammersmith ............................ 14 STI Rotherhithe ................................ 15 STI Amber ........................................ 16 STI Topaz ......................................... 17 STI Ruby .......................................... 18 STI Garnet ........................................ 19 STI Onyx .......................................... 20 STI Sapphire ..................................... 21 STI Emerald ..................................... 22 STI Beryl .......................................... 23 STI Le Rocher .................................. 24 STI Larvotto ..................................... 25 STI Fontvieille ................................. 26 STI Ville ........................................... 27 STI Duchessa ................................... 28 STI Opera ......................................... 29 STI Texas City ................................. 30 STI Meraux ...................................... 31 STI Chelsea ...................................... 32 STI San Antonio ............................... 33 STI Venere ....................................... 34 STI Virtus ......................................... 35 STI Powai ......................................... 36 STI Aqua .......................................... 37 STI Dama ......................................... 38 STI Olivia ......................................... 39 STI Mythos ....................................... 40 STI Benicia ....................................... 41 STI Regina ....................................... 42 STI St. Charles .................................. 43 STI Mayfair ...................................... 44 STI Yorkville .................................... 45 STI Milwaukee ................................. 46 STI Battery ........................................ 47 STI Soho ........................................... 48 STI Memphis .................................... 49 STI Tribeca ....................................... 50 STI Gramercy ................................... 51 STI Bronx ......................................... 52 STI Pontiac ....................................... 53 STI Manhattan .................................. 54 STI Queens ....................................... 55 STI Osceola ...................................... 56 STI Notting Hill ................................ 57 STI Seneca ........................................ 58 STI Westminster ............................... 59 STI Brooklyn .................................... 60 STI Black Hawk ............................... 61 STI Elysees ....................................... 62 STI Madison ..................................... 63 STI Park ............................................ 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2014 2014 2014 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 109,999 109,999 109,999 SHTP (1) SHTP (1) Time Charter (5) SHTP (1) SHTP (1) SHTP (1) SHTP (1) SHTP (1) SHTP (1) SHTP (1) SHTP (1) Time Charter (5) SHTP (1) SHTP (1) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) Time Charter (6) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SMRP(2) Time Charter (7) SMRP(2) Time Charter (7) SMRP(2) SMRP(2) SLR2P (4) SLR2P (4) SLR2P (4) 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1B — 1B — — — — — 22 Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax Handymax MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR MR LR2 LR2 LR2 Vessel Name Owned vessels Year Built DWT Ice class Employment Vessel type 64 STI Orchard ...................................... 65 STI Sloane ........................................ 66 STI Broadway ................................... 67 STI Condotti ..................................... 68 STI Rose ........................................... 69 STI Veneto ........................................ 70 STI Alexis ......................................... 71 STI Winnie ........................................ 72 STI Oxford ........................................ 73 STI Lauren ........................................ 74 STI Connaught .................................. 75 STI Spiga .......................................... 76 STI Savile Row ................................. 77 STI Kingsway ................................... 78 STI Carnaby ...................................... 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 109,999 — — — — — — — — — — — — — — — SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) Time Charter (8) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) SLR2P (4) LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 LR2 Total owned DWT ............................ 4,903,982 Vessel Name Time or bareboat chartered-in vessels 79 Kraslava ........................................... 80 Krisjanis Valdemars ........................ 81 Iver Prosperity ................................. 82 Miss Mariarosaria ............................ 83 Vukovar ........................................... 84 Targale ............................................. 85 Gan-Trust ......................................... 86 Hellespont Progress ......................... 87 Densa Crocodile .............................. 88 Densa Alligator ................................ 89 STI Lombard ................................... Total chartered-in DWT .................. Newbuildings currently under construction Vessel Name Hull 2601 - TBN STI Galata ...... Hull 2602 - TBN STI Taksim ..... Hull 2603 - TBN STI Leblon ..... Hull 2604 - TBN STI La Boca ... Hull 2605 - TBN STI San 90 91 92 93 94 Telmo ...................................... Hull 2606 - TBN STI Jurere ....... 95 Hull 2607 - TBN STI Esles II .... 96 Hull 2608 - TBN STI Jardins ..... 97 Hull S3120 - TBN STI Selatar ... 98 99 Hull S3121 - TBN STI Rambla .. 100 Hull 5003 - TBN STI Grace ....... 101 Hull 5004 - TBN STI Jermyn ..... Total newbuilding product tankers DWT ............................... Total Fleet DWT ......................... Year Built DWT Ice class Employment Vessel type Daily Base Rate Expiry (9) 2007 2007 2007 2011 2015 2007 2013 2006 2015 2013 2015 Yard HMD HMD HMD HMD HMD HMD HMD HMD SSME SSME DHSC DHSC 1B 1B — — — — — — — — — SHTP (1) SHTP (1) SHTP (1) SMRP(2) SMRP(2) SMRP(2) SMRP(2) SPTP (3) SLR2P (4) SLR2P (4) SLR2P (4) Handymax $ Handymax $ Handymax $ $ MR $ MR $ MR $ MR $ LR1 $ LR2 $ LR2 $ LR2 14,150 14,150 13,500 15,250 17,034 15,200 17,500 16,250 22,600 24,875 10,000 18-May-16 01-May-16 03-Apr-16 26-May-16 (10) 01-May-18 17-May-16 (11) 06-Jan-17 (12) 18-Mar-17 (13) 07-Feb-17 (14) 17-Sep-16 (15) 03-May-16 (16) 37,258 37,266 37,412 47,499 49,990 49,999 51,561 73,728 105,408 105,708 109,999 705,828 DWT 52,000 52,000 52,000 52,000 52,000 Ice class — — — — — (17) (17) (17) (17) (17) Vessel type MR MR MR MR MR MR MR MR LR2 LR2 LR2 LR2 52,000 (17) 52,000 (17) (17) 52,000 (18) 109,999 (18) 109,999 (19) 109,999 (19) 109,999 — — — — — — — 855,996 6,465,806 (1) This vessel operates in or is expected to operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP is operated by Scorpio Commercial Management (SCM). SHTP and SCM are related parties to the Company. (2) This vessel operates in or is expected to operate in the Scorpio MR Pool (SMRP). SMRP is operated by SCM. SMRP is a related party to the Company. (3) This vessel operates in or is expected to operate in the Scorpio Panamax Tanker Pool (SPTP). SPTP is operated by SCM. SPTP is a related party to the Company. (4) This vessel operates in or is expected to operate in the Scorpio LR2 Pool (SLR2P). SLR2P is operated by SCM. SLR2P is a related party to the Company. (5) This vessel is currently time chartered-out to an unrelated third-party for three years at $18,000 per day. This time charter is scheduled to expire in January 2019. (6) This vessel is currently time chartered-out to an unrelated third party for two years and the agreement expires at the end of March 2016. The agreement also contains a 50% profit sharing provision whereby we split all of the vessel’s profits above the daily base rate with the charterer. Upon expiration of this time charter agreement, this vessel is expected to join the SMRP. 23 (7) This vessel is currently time chartered-out to an unrelated third-party for three years at $20,500 per day. This time charter is scheduled to expire in December 2018. (8) This vessel is currently time chartered-out to an unrelated third-party for three years at $28,000 per day. This time charter is scheduled to expire in February 2019. (9) Redelivery from the charterer is plus or minus 30 days from the expiry date. (10) We have an option to extend the charter for an additional year at $16,350 per day. (11) We have an option to extend the charter for an additional year at $16,200 per day. (12) In October 2015, we extended the charter for an additional year at $17,500 per day effective January 2016. We have an option to extend the charter for an additional year at $18,000 per day. (13) In February 2016, we extended the charter for an additional year at $17,250 per day effective March 2016. (14) In November 2015, we declared an option to extend the charter for an additional year at $22,600 per day effective February 2016. We have entered into an agreement with a third-party whereby we split all of the vessel’s profits and losses above or below the daily base rate. (15) We have an option to extend the charter for an additional year at $26,925 per day. (16) This vessel was delivered in August 2015 under a bareboat charter-in agreement for $10,000 per day for up to nine months. We are obligated to take ownership of the vessel, and pay the remaining 90% of the contract price, at the conclusion of the bareboat charter (or at any point prior, at our discretion). (17) These newbuilding vessels are being constructed at HMD. All eight vessels are expected to be delivered to us during 2017. (18) These newbuilding vessels are being constructed at SSME. One vessel is expected to be delivered in the third quarter of 2016 and one in the fourth quarter of 2016. (19) These newbuilding vessels are being constructed at DHSC. One vessel is expected to be delivered in the first quarter of 2016 and one in the second quarter of 2016 Chartering Strategy Generally, we operate our vessels in commercial pools on time charters or in the spot market. Commercial Pools To increase vessel utilization and thereby revenues, we participate in commercial pools with other shipowners of similar modern, well-maintained vessels. As of March 17, 2016, 83 of the vessels in our Operating Fleet operate in one of the Scorpio Group Pools. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial managers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and contracts of affreightment, or COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market. Time Charters Time charters give us a fixed and stable cash flow for a known period of time. Time charters also mitigate in part the seasonality of the spot market business, which is generally weaker in the second and third quarters of the year. In the future, we may opportunistically look to enter our vessels into time charter contracts. We may also enter into time charter contracts with profit sharing agreements, which enable us to benefit if the spot market increases. As of the date of this annual report, six of the vessels in our Operating Fleet are operating under long-term time charters (with initial terms of one year or greater). Spot Market A spot market voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed freight per ton of cargo or a specified total amount. Under spot market voyage charters, we pay voyage expenses such as port, canal and bunker costs. Spot charter rates are volatile and fluctuate on a seasonal and year-to-year basis. Fluctuations derive from imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Vessels operating in the spot market generate revenue that is less predictable, but may enable us to capture increased profit margins during periods of improvements in tanker rates. As of March 17, 2016, none of the vessels in our Operating Fleet were operating directly in the spot market. Management of our Fleet Commercial and Technical Management Our vessels are commercially managed by SCM and technically managed by SSM pursuant to a Master Agreement, which may be terminated upon two years notice. SCM and SSM are related parties of ours. We expect that additional vessels that we may acquire in the future will also be managed under the Master Agreement or on substantially similar terms. 24 SCM’s services include securing employment, in the spot market and on time charters, for our vessels. SCM also manages the Scorpio Group Pools. When our vessels are operating in one of the Scorpio Group Pools, SCM, the pool manager, charges fees of $300 per vessel per day with respect to our Panamax/LR1 vessels, $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus 1.50% commission on gross revenues per charter fixture. These are the same fees that SCM charges other vessel owners in these pools, including third-party owned vessels. For commercial management of our vessels that are not operating in any of the Scorpio Group Pools, we pay SCM a fee of $250 per vessel per day for each Panamax, LR1 and LR2 vessel and $300 per vessel per day for each Handymax and MR vessel, plus 1.25% commission on gross revenues per charter fixture. SSM’s services include day-to-day vessel operations, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. We currently pay SSM $685 per vessel per day to provide technical management services for each of our vessels. This fee is based on contracted rates that were the same as those charged to other, third party vessels managed by SSM at the time the management agreements were entered into. During 2015, we paid a $0.5 million termination fee due under the vessel’s commercial management fee agreement with SCM and $0.5 million termination fee due under the vessel’s technical management fee agreement with SSM as a result of the sale of STI Highlander. Administrative Services Agreement We have an Administrative Services Agreement with Scorpio Services Holding Limited, or SSH, or our Administrator, for the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. SSH is a related party of us. We reimburse our current Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. The services provided to us by our Administrator may be sub-contracted to other entities within the Scorpio Group. We also pay our Administrator a fee for arranging vessel purchases and sales for us, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. For the year ended December 31, 2015, we paid our Administrator $12.6 million in aggregate in connection with our purchase and taking delivery of 29 vessels and our sale of four vessels. We believe this 1% fee on purchases and sales is customary in the tanker industry. Further, pursuant to our Administrative Services Agreement, our Administrator, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. Our Administrative Services Agreement, whose effective commencement began in December 2009, can be terminated upon two years notice. The International Oil Tanker Shipping Industry All the information and data presented in this section, including the analysis of the oil tanker shipping industry, has been provided by Drewry. The statistical and graphical information contained herein is drawn from Drewry’s database and other sources. According to Drewry: (i) certain information in Drewry’s database is derived from estimates or subjective judgments; (ii) the information in the databases of other maritime data collection agencies may differ from the information in Drewry’s database; and (iii) while Drewry has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures. Oil Tanker Demand In broad terms, demand for oil products traded by sea is principally affected by world and regional economic conditions, as well as other factors such as changes in the location of productive capacity, and variations in regional prices. Demand for shipping capacity is a product of the physical quantity of the cargo (measured, depending on the cargo in terms of tons or cubic metrics) together with the distance the cargo is carried. Demand cycles move broadly in line with developments in global economy, with demand for products slowing significantly in the period immediately after the onset of the global economic downturn in late 2008, before recovering gradually from 2011 onwards with the general improvement in the economic climate. 25 In 2015, 3.2 billion tons of crude oil, products and vegetable oils / chemicals were moved by sea. Of this, crude shipments constituted 2.1 billion tons of cargo, products 0.9 billion tons, with the balance made up of other bulk liquids, including vegetable oils, chemicals and associated products. World Seaborne Tanker Trade Year 2000 ............................. 2001 ............................. 2002 ............................. 2003 ............................. 2004 ............................. 2005 ............................. 2006 ............................. 2007 ............................. 2008 ............................. 2009 ............................. 2010 ............................. 2011 ............................. 2012 ............................. 2013 ............................. 2014 ............................. 2015 (1) ......................... Crude Oil Products Mill T % Y-o-Y Mill T % Y-o-Y Mill T % Y-o-Y Total Mill T % Y-o-Y Veg Oils/ Chemicals 1,764 1,818 1,828 1,937 2,043 2,076 2,086 2,102 2,111 2,025 2,066 2,032 2,075 2,011 2,028 2,085 3.1% 0.5% 6.0% 5.5% 1.6% 0.5% 0.8% 0.4% -4.1% 2.0% -1.6% 2.1% -3.1% 0.8% 2.8% 498 496 514 524 571 618 648 695 745 733 791 842 849 881 883 905 -0.4% 3.6% 1.9% 9.0% 8.2% 4.9% 7.3% 7.2% -1.6% 7.9% 6.4% 0.8% 3.8% 0.2% 2.5% 111 114 122 129 141 156 166 170 169 178 189 194 202 211 215 224 2,372 3.0% 2,428 7.0% 2,463 5.9% 2,590 9.5% 2,755 10.5% 2,850 6.5% 2,900 2.5% 2,967 -0.6% 3,025 5.4% 2,936 6.2% 3,046 2.6% 3,068 4.2% 3,126 4.1% 3,103 2.1% 3,126 4.2% 3,214 2.3% 1.5% 5.1% 6.4% 3.4% 1.8% 2.3% 2.0% -2.9% 3.7% 0.7% 1.9% -0.8% 0.8% 2.8% CAGR (2010-2015) ..... CAGR (2005-2015) ..... 0.2% 0.0% 2.7% 3.9% 3.4% 3.7% 1.1% 1.2% (1) Provisional assessment Source: Drewry The volume of oil moved by sea was affected by economic recession in 2008 and 2009, but since then renewed growth in the world economy and in oil demand has had a positive impact on seaborne trade. Oil demand has benefited from economic growth in Asia, especially in China, where oil consumption increased by compound average growth rate (CAGR) of 5.4% to 11.2 million barrels per day (mbpd) between 2005 and 2015. Despite the recent slow-down in the Chinese economy, per capita oil consumption in developing countries such as China and India is low in comparison with the developed world, and this provides scope for higher oil consumption in these economies. Conversely, oil consumption in developed OECD economies has been in decline for much of the last decade, although provisional data for the United States (U.S.) and some European countries indicates that this trend was reversed in 2015. This was almost certainly due to the positive impact of lower oil prices on demand for products such as gasoline. World Oil Consumption: 1990-2015 (Million bpd) Source: Drewry 26 Provisional data for 2015 suggests that world oil demand was 94.5 million bpd, an increase of 1.8% on 2014, and between 2005 and 2015, world oil demand grew by a CAGR of 1.2%. Oil Product Exports & Imports In the U.S. as a result of the development of shale oil deposits, domestic crude oil production increased by a CAGR of 10.6% between 2008 and 2015 to reach just in excess of 9.0 million bpd. Horizontal drilling and hydraulic fracturing have triggered a shale oil revolution and rising crude oil production also ensured the availability of cheaper feedstocks to local refineries. As a result, the U.S. has become a major net exporter of products (see chart below). Oil Product Exports - Major Growth Regions (Million Bpd) Source: Drewry In a short span of time, the U.S. has become the largest exporter of refined products in the world, with supplies from U.S. Gulf Coast terminals heading to most parts of the globe. By way of illustration, U.S. product exports to South America were close to 5 million tons in 2005, but owing to strong import demand and the growth in U.S. products availability, exports rose to in excess of 40 million tons in 2015. Most of these exports were carried by MR product tankers which have proved to be the mainstay of export shipping capacity. The shift in the location of global oil production is also being accompanied by a shift in the location of global refinery capacity and throughput. In short, capacity and throughput are moving from the developed to the developing world. Between 2006 and 2015 total OECD refining throughput declined by 6.6%, largely as a result of cutbacks in Europe. On the other hand, throughput in the Americas in the same period was up, rising from 18.5 to 19.2 million bpd. In 2015 OECD countries accounted for 47.1% of global refinery throughput. Asia (excluding China) and the Middle East added over 0.6 million bpd of export-oriented refinery capacity in 2014. In 2015 the Middle East added a further 0.4 million bpd of new capacity and a further 0.2 million bpd came on stream in Asia. As a result of these developments countries such as India have become major exporters of products. Export-oriented refineries in India and the Middle East, coupled with the closure of refining capacity in the developed world, have prompted longer-haul shipments to cater for product demand. 27 Oil Product Imports - Major Growth Regions (Million bpd) Current Tanker Fleet Source: Drewry Crude oil is transported in uncoated vessels, which range upwards in size from 55,000 dwt. Products are carried in coated and uncoated ships and include commodities such as fuel oil and vacuum gas oil (often referred to as “dirty products”), gas oil, gasoline, jet fuel, kerosene and naphtha (often referred to as “clean products”). In addition, some product tankers are also able to carry bulk liquid chemicals and edible oils and fats if they have the appropriate International Maritime Organization (IMO) certification. These vessels are classified as product/chemical tankers and as such they represent a swing element in supply, having the ability to move between trades depending on market conditions. Clean petroleum products are therefore carried by non-IMO product tankers and IMO certified product/chemical tankers. IMO tankers will also carry, depending on their tank coatings, a range of other products including organic and inorganic bulk liquid chemicals, vegetable oils and animal fats and special products such as molasses. As of February 29, 2016, the total oil tanker fleet (crude, products and product/chemical tankers) consisted of 4,372 ships with a combined capacity of 493.1 million dwt. The Oil Tanker Fleet - February 29, 2016 Deadweight Tons (DWT) Number of Vessels % of Fleet Capacity (M DWT ) % of Fleet Vessel Type Crude Tankers VLCC/ULCC .............................................................................. Suezmax ...................................................................................... Aframax ....................................................................................... Panamax ...................................................................................... Handymax ................................................................................... Total Crude Fleet ...................................................................... 200,000+ 120-199,999 80-119,999 55-79,999 10-54,999 Product Tankers (1) .................................................................. Long Range 2 (LR2) ................................................................... Long Range 1 (LR1) ................................................................... Medium Range 2 (MR2) ............................................................. Medium Range 1 (MR1) ............................................................. Handy .......................................................................................... Total Product Fleet ................................................................... 80,000+ 55-79,999 40-54,999 25-39,999 10-24,999 Total Fleet VLCC/ULCC .............................................................................. Suezmax ...................................................................................... Aframax ....................................................................................... Panamax ...................................................................................... Handy/Handymax ....................................................................... Total Tanker Fleet .................................................................... 200,000+ 120-199,999 80-119,999 55-79,999 10-54,999 658 487 676 87 36 1,944 307 330 1,538 123 130 2,428 658 487 983 417 1,827 4,372 33.8 25.1 34.8 4.5 1.9 100.0 12.6 13.6 63.3 5.1 5.4 100.0 15.1 11.1 22.5 9.5 41.8 100.0 202.5 75.6 72.7 6.0 0.8 357.6 34.0 24.1 71.4 4.1 1.9 135.5 202.5 75.6 106.7 30.1 78.2 493.1 56.6 21.1 20.3 1.7 0.2 100.0 25.1 17.8 52.7 3.0 1.4 100.0 41.1 15.3 21.6 6.1 15.9 100.0 (1) Includes product and product/chemical tankers, excludes chemical tankers Source: Drewry 28 The world product tanker fleet as February 29, 2016 consisted of 2,428 ships with a combined capacity of 135.5 million dwt. The breakdown of the fleet by type (product and product/chemical) and by size together with the orderbook for newbuilding tankers as of February 29, 2016, is illustrated in the table below. The World Product Tanker Fleet(1) & Orderbook - February 29, 2016 Total Product Fleet Scheduled Year of Delivery Existing Fleet Orderbook % Fleet 2016 2017 2018 2019 + Deadweight Tons (Dwt) Vessel Size Long Range 2 (LR2) .. 80,000+ Long Range 1 (LR1) .. 55-79,999 Medium Range 2 (MR2) ......................... 37-54,999 Medium Range 1 (MR1) ......................... 25-36,999 Handy ......................... 10-24,999 Total ............................ Of Which: Product Tankers Deadweight Tons (Dwt) Long Range 2 (LR2) ... 80,000+ Long Range 1 (LRI) ... 55-79,999 Medium Range 2 (MR2) ......................... 37-54,999 Medium Range 1 (MR1) ......................... 25-36,999 Handy ......................... 10-24,999 Total ............................ M dwt No M Dwt No Dwt No 40 34.0 29 24.1 8.8 25.4 25.9 4.6 19.1 19.2 78 63 M Dwt No 33 27 4.6 2.1 No 307 330 M Dwt No 3.7 2.0 M Dwt No M Dwt 5 0.6 — — 7 0.5 — — 1,538 71.4 209 10.2 13.6 14.3 108 5.3 71 3.4 18 0.9 12 0.6 4.1 1.9 123 130 10 24 2,428 135.5 384 0.3 7.7 8.1 0.4 18.5 21.8 24.3 15.8 18.0 2 9 0.1 0.2 188 12.2 5 9 145 0.1 0.2 9.4 2 1 — 0.1 6 0.1 — — 0.7 37 2.1 14 Existing Fleet Orderbook % Fleet 2016 2017 2018 2019 + M dwt No 78 33.5 59 22.1 No 302 301 M Dwt No Dwt No 40 25 8.8 25.8 26.3 4.4 19.6 19.8 M Dwt No 33 27 4.6 1.9 M Dwt No 5 7 3.7 2.0 M Dwt No 0 0 0.6 0.5 M Dwt 0.0 0.0 487 22.5 17 0.8 3.5 3.7 10 0.5 2 0.1 1 0.1 80 129 1,299 2.6 1.9 5 11 82.6 170 0.2 0.2 14.3 6.3 6.2 8.5 10.4 13.1 17.4 2 1 78 0.1 0.0 7.0 3 8 73 0.1 0.1 6.0 0 2 15 0.0 0.0 1.2 Product/Chemical Existing Fleet Orderbook % Fleet 2016 2017 2018 Deadweight Tons (Dwt) Long Range 2 (LR2) ... 80,000+ Long Range 1 (LRI) ... 55-79,999 Medium Range 2 (MR2) ......................... 37-54,999 Medium Range 1 (MR1) ......................... 25-36,999 Handy ......................... 10-24,999 Total ............................ M dwt No 0 4 0.5 2.0 No 5 29 M Dwt No Dwt No M Dwt No M Dwt No 0.0 0.0 0.0 0.3 13.8 12.9 0 0.0 4 0.3 0 0 0.0 0.0 0 0 M Dwt No 0 0 0.0 0.0 M Dwt 0.0 0.0 1,051 48.9 192 9.4 18.3 19.1 98 4.8 69 3.3 17 0.9 8 0.4 43 1.5 5 1 — 13 1,129 52.9 214 0.2 11.6 10.3 nm nm 0.2 10.0 19.0 18.9 0 0.0 8 0.1 110 5.2 2 1 72 0.1 0.0 3.4 1 4 22 0.0 0.1 0.9 2 0 10 0.1 0.0 0.5 (1) Product and product/chemical tankers only, excludes pure chemical tankers Source: Drewry 29 4 0 0 4 0.2 0.0 0.0 0.2 201 9+ As of February 29, 2016, the world product tanker orderbook for all vessels above 10,000 dwt comprised 384 ships with a combined capacity of 24.3 million dwt, equivalent to 18.0% of the existing fleet. Based on the total orderbook and scheduled deliveries, approximately 12.2 million dwt is expected to be delivered in 2016; 9.4 million dwt in 2017 and 2.1 million dwt in 2018 and beyond. In recent years, however, the orderbook has been affected by the non-delivery of vessels (sometimes referred to as ‘‘slippage’’). Some of this slippage resulted from delays, either through mutual agreement or through shipyard problems, while some was due to vessel cancellations. Slippage is likely to remain an issue going forward and, as such, it will have a moderating effect over product tanker fleet growth in 2016 and 2017. The Oil Tanker Freight Market Tanker charter hire rates and vessel values for all tankers are influenced by the supply and demand for tanker capacity. Also, in general terms, time charter rates are less volatile than spot rates, because they reflect the fact that the vessel is fixed for a longer period of time. In the spot market, rates will reflect the immediate underlying conditions in vessel supply and demand and are thus prone to more volatility. The trend in spot rates since 2000 for the main vessel classes is shown in the table below. Oil Tanker - Spot (TCE) Rates: 2000-2016 (US$/Day) Caribs USAC 40-70,000 DWT NW Europe NW Europe 70-100,000DWT West Africa Caribs/USES 150-160,000 DWT AG Japan 280-300,000 DWT 28,375 26,300 16,567 28,833 42,158 34,933 28,792 30,100 36,992 13,450 17,950 11,000 15,245 14,783 18,217 28,500 24,000 40,375 35,308 22,800 41,883 55,408 57,517 47,067 41,975 56,408 19,883 27,825 12,283 9,625 12,000 33,075 44,500 30,900 Source: Drewry 40,950 31,992 19,325 37,367 64,792 40,883 40,142 35,392 52,650 20,242 19,658 8,909 10,517 7,500 21,200 40,900 30,400 52,450 36,891 21,667 49,342 95,258 59,125 51,142 45,475 89,300 29,483 40,408 19,933 17,617 16,417 24,892 68,600 50,000 Year 2000 ............................... 2001 ............................... 2002 ............................... 2003 ............................... 2004 ............................... 2005 ............................... 2006 ............................... 2007 ............................... 2008 ............................... 2009 ............................... 2010 ............................... 2011 ............................... 2012 ............................... 2013 ............................... 2014 ............................... 2015 ............................... Feb-16 ............................ After a period of favorable market conditions between 2005 and 2008, demand for products fell as the world economy went into recession in the second half of 2008 and there was a negative impact on product tanker demand. With supply at the same time increasing at a fast pace, falling utilization levels pushed tanker freight rates downwards in 2009. A modest recovery took place in the early part of 2010, but this was short-lived and rates started to fall once more in mid-2012 and they remained weak until late 2013. Freight rates in the tanker sector started to improve in the second half of 2014 as result of low growth in vessel supply and rising vessel demand. In the products sector a number of factors combined to push up rates, including: • Increased trade due to higher stocking activity and improved demand for oil products • Longer voyage distances because of refining capacity additions in Asia • Product tankers also carrying crude encouraged by firm freight rates for dirty tankers • Lower bunker prices contributing to higher net earnings 30 Oil Tanker Newbuilding Prices Newbuilding prices increased significantly between 2003 and 2007 primarily as a result of increased tanker demand. Thereafter prices weakened in the face of a poor freight market and lower levels of new ordering. In late 2013, prices started to recover and they continued to edge up slowly during 2014 before falling by a small amount in late 2015 and early 2016. For most oil tanker sizes newbuilding prices are still below the peaks reported at the height of the market boom in 2008 and also below long term averages. Oil Tankers: Newbuilding Prices: 2000-2016 (In millions of U.S. dollars) Year End 30,000 DWT 50,000 DWT 75,000 DWT 110,000 DWT 160,000 DWT 300,000 DWT n/a n/a n/a 28.5 34.0 37.5 40.5 46.0 40.0 31.0 33.0 31.5 30.0 31.0 32.9 32.0 32.0 2000 ........................ 2001 ........................ 2002 ........................ 2003 ........................ 2004 ........................ 2005 ........................ 2006 ........................ 2007 ........................ 2008 ........................ 2009 ........................ 2010 ........................ 2011 ........................ 2012 ........................ 2013 ........................ 2014 ........................ 2015 ........................ Feb-16 ..................... Secondhand Prices 31.5 27.0 26.5 30.5 39.0 42.0 47.5 54.0 46.5 36.0 36.0 36.0 33.0 35.0 36.9 36.0 35.0 36.5 33.5 31.0 34.5 41.0 43.0 50.0 64.0 57.0 42.5 46.0 44.0 42.0 43.0 45.5 45.0 44.0 Source: Drewry 41.0 38.0 36.0 40.0 57.0 59.0 65.0 78.0 71.5 52.0 57.0 52.8 48.0 51.5 54.0 52.0 51.0 49.5 47.0 44.0 52.0 68.0 71.0 78.0 90.0 87.0 62.0 67.0 61.7 56.5 59.0 64.8 63.0 63.0 76.0 72.0 66.0 73.0 105.0 120.0 128.0 146.0 142.0 101.0 105.0 99.0 92.0 93.5 98.5 94.0 93.0 Secondhand values primarily, albeit with a lag, reflect prevailing and expected charter rates. During extended periods of high charter rates vessel values tend to appreciate and vice versa. However vessel values are also influenced by other factors, including the age of the vessel. Prices for young vessels, those approximately up to five years old, are also influenced by newbuilding prices while prices for old vessels, near the end of their useful economic life, those approximately at or in excess of 25 years, are influenced by the value of scrap steel. 31 The table below illustrates the movements of prices (expressed in US$ million) for secondhand oil tankers from 2000 to February 2016. In the last few months of 2013, prices for all modern tankers started to rise as a result of the rise in freight rates and more positive market sentiment and further gains were recorded in 2014 and 2015. However, as with newbuilding prices, in February 2016 secondhand prices for oil tankers were still below long-term averages. Year End Age 2000 ......................... 2001 ......................... 2002 ......................... 2003 ......................... 2004 ......................... 2005 ......................... 2006 ......................... 2007 ......................... 2008 ......................... 2009 ......................... 2010 ......................... 2011 ......................... 2012 ......................... 2013 ......................... 2014 ......................... 2015 ......................... Feb-16 ...................... 30,000 DWT 5 Yrs 25.5 25.0 21.5 29.5 42.0 45.5 47.5 52.0 42.0 24.0 21.5 22.5 20.0 21.0 20.2 20.0 20.0 Oil Tanker Secondhand Prices: 2000-2016 (In millions of U.S. dollars) 45,000 DWT 5 Yrs 25.5 25.0 21.5 29.5 42.0 45.5 47.5 52.0 42.0 24.0 24.0 27.0 24.0 29.0 27.1 27.0 27.0 75,000 DWT 5 Yrs 28.5 25.5 21.0 24.0 38.0 39.0 48.0 59.0 46.0 32.5 35.0 32.0 25.0 31.0 32.4 36.0 34.0 95,000 DWT 5 Yrs 36.5 34.5 29.5 37.0 57.0 58.0 63.0 68.5 55.0 38.0 42.0 33.5 27.5 32.0 38.6 46.0 45.0 150,000 DWT 5 Yrs 44.0 41.5 39.0 47.0 73.0 75.0 77.0 91.5 77.0 53.0 58.0 45.5 40.0 42.0 50.0 60.0 57.0 300,000 DWT 5 Yrs 70.0 63.0 55.0 70.0 112.0 110.0 115.0 130.0 110.0 77.5 85.5 58.0 57.0 60.0 73.1 80.0 75.0 Environmental and Other Regulations Source: Drewry Government laws and regulations significantly affect the ownership and operation of our vessels. We are subject to various international conventions, laws and regulations in force in the countries in which our vessels may operate or are registered. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modification and implementation costs. A variety of government, quasi-governmental and private organizations subject our vessels to both scheduled and unscheduled inspections. These organizations include the local port authorities, national authorities, harbor masters or equivalent entities, classification societies, relevant flag state (country of registry) and charterers, particularly terminal operators and oil companies. Some of these entities require us to obtain permits, licenses, certificates and approvals for the operation of our vessels. Our failure to maintain necessary permits, licenses, certificates or approvals could require us to incur substantial costs or temporarily suspend operation of one or more of the vessels in our fleet, or lead to the invalidation or reduction of our insurance coverage. We believe that the heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for tankers that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with applicable local, national and international environmental laws and regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations; however, because such laws and regulations are frequently changed and may impose increasingly strict requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that results in significant oil pollution, release of hazardous substances, loss of life, or otherwise causes significant adverse environmental impact, such as the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, could result in additional legislation, regulation, or other requirements that could negatively affect our profitability. 32 International Maritime Organization The IMO is the United Nations agency for maritime safety and the prevention of pollution by ships. The IMO has adopted several international conventions that regulate the international shipping industry, including but not limited to the CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage, and the MARPOL Convention. The MARPOL Convention is broken into six Annexes, each of which establishes environmental standards relating to different sources of pollution: Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried, in bulk, in liquid or packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, adopted by the IMO in September of 1997, relates to air emissions. In 2012, the IMO Marine Environment Protection Committee, or the MEPC, adopted by resolution amendments to the international code for the construction and equipment of ships carrying dangerous chemicals in bulk, or the IBC Code. The provisions of the IBC Code are mandatory under MARPOL and SOLAS. These amendments, which entered into force in June 2014, pertain to revised international certificates of fitness for the carriage of dangerous chemicals in bulk and identifying new products that fall under the IBC Code. We may need to make certain financial expenditures to comply with these amendments. As of January 1, 2016, amendments to Annex I, the IBC Code, requires that all chemical tankers must be fitted with approved stability instruments capable of verifying compliance with both intact and damage stability. In 2013, the MEPC adopted by resolution amendments to the MARPOL Annex I Condition Assessment Scheme, or CAS. The amendments, which became effective on October 1, 2014, pertain to revising references to the inspections of bulk carriers and tankers after the 2011 ESP Code, which enhances the programs of inspections, becomes mandatory. We may need to make certain financial expenditures to comply with these amendments. Air Emissions In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution. Effective May 2005, Annex VI sets limits on nitrogen oxide emissions from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits “deliberate emissions” of “ozone depleting substances,” defined to include certain halons and chlorofluorocarbons. “Deliberate emissions” are not limited to times when the ship is at sea; they can for example include discharges occurring in the course of the ship’s repair and maintenance. Emissions of “volatile organic compounds” from certain tankers, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls) are also prohibited. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls of sulfur emissions known as “Emission Control Areas,” or ECAs (see below). The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. As of January 1, 2012, the amended Annex VI requires that fuel oil contain no more than 3.50% sulfur. By January 1, 2020, sulfur content must not exceed 0.50%, subject to a feasibility review to be completed no later than 2018. Sulfur content standards are even stricter within certain ECAs. As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content of 0.10%. Amended Annex VI establishes procedures for designating new ECAs. Currently, the Baltic Sea and the North Sea have been so designated. On August 1, 2012, certain coastal areas of North America were designated ECAs and effective January 1, 2014, the applicable areas of the United States Caribbean Sea were designated ECAs. If other ECAs are approved by the IMO or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures, operational changes, or otherwise increase the costs of our operations. Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation. The EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2009. As a result of these designations or similar future designations, we may be required to incur additional operating or other costs. Safety Management System Requirements The IMO also adopted SOLAS and the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS and LL standards. May 2012 SOLAS amendments entered into force as of January 1, 2014. The Convention on Limitation for Maritime Claims was recently amended and the amendments went into effect on June 8, 2015. The amendments alter the limits of liability for a loss of life or personal injury claim and a property claim against ship owners. 33 Our operations are also subject to environmental standards and requirements contained in the ISM Code promulgated by the IMO under Chapter IX of SOLAS. The ISM Code requires the owner of a vessel, or any person who has taken responsibility for operation of a vessel, to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that has been developed for our vessels for compliance with the ISM Code. The failure of a ship-owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports. The ISM Code requires that vessel operators also obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with code requirements for a safety management system. No vessel can obtain a certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained documents of compliance for its offices and safety management certificates for all of our vessels for which the certificates are required by the ISM Code. These documents of compliance and safety management certificates are renewed as required. Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or bareboat charterer to increased liability, may lead to decreases in, or invalidation of, available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. Pollution Control and Liability Requirements IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatory nations to such conventions. For example, many countries have ratified and follow the liability plan adopted by the IMO and set out in the CLC of 1969, as amended by different Protocols in 1976, 1984, and 1992, and amended in 2000. Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability, expressed using the International Monetary Fund currency unit of Special Drawing Rights. The limits on liability have since been amended so that compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner’s personal fault and under the 1992 Protocol where the spill is caused by the shipowner’s personal act or omission by intentional or reckless conduct where the shipowner knew pollution damage would probably result. The CLC requires ships covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner’s liability for a single incident. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO. The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on shipowners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur. In addition, the IMO adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM’s Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world’s merchant shipping. To date, the BWM Convention has not yet been ratified but proposals regarding implementation have recently been submitted to the IMO. Many of the implementation dates originally written in the BWM Convention have already passed, so that once the BWM Convention enters into force, the period for installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems, or BWMS. For this reason, on December 4, 2013, the IMO Assembly passed a resolution revising the application dates of BWM Convention so that they are triggered by the entry into force date and not the dates originally in the BWM Convention. This in effect makes all vessels constructed before the entry into force date ‘existing’ vessels, and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force. Furthermore, in October 2014, the MEPC met and adopted additional resolutions concerning the BWM Convention’s implementation. Once mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers and the costs of ballast 34 water treatments may be material. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States, for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternative measure, and to comply with certain reporting requirements. Although we do not believe that the costs of such compliance would be material, it is difficult to predict the overall impact of such requirements on our operations. The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations. United States Regulations OPA established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all “owners and operators” whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the CERCLA, which applies to the discharge of hazardous substances (including certain forms of oil) whether on land or at sea. OPA and CERCLA both define “owner and operator” “in the case of a vessel, as any person owning, operating or chartering by demise, the vessel.” Accordingly, both OPA and CERCLA impact our operations. Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third-party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include: • injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs; • injury to, or economic losses resulting from, the destruction of real and personal property; • net loss of taxes, royalties, rents, fees or net profits resulting from injury, destruction or loss of real or personal property, or natural resources; • loss of subsistence use of natural resources that are injured, destroyed or lost; • lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and • net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources. OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective December 21, 2015, the United States Coast Guard, or the USCG, adjusted the limits of OPA liability to the greater of $2,200 per gross ton or $18,796,800 for any double-hull tanker that is over 3,000 gross tons (subject to periodic adjustment for inflation), and our fleet is entirely composed of vessels of this size class. These limits of liability do not apply if an incident was proximately caused by the violation of an applicable United States federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party’s gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident where the responsibility party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act. CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third-party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo or residue and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA. 35 OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We have provided such evidence and received certificates of financial responsibility from the USCG for each of our vessels that is required to have one. OPA permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA. Some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, however, in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining tanker owners’ responsibilities under these laws. The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes, including the raising of liability caps under OPA. For example, on August 15, 2012, the United States Bureau of Safety and Environmental Enforcement, or the BSEE, issued a final drilling safety rule for offshore oil and gas operations that strengthens the requirements for safety equipment, well control systems, and blowout prevention practices. In December 2015, the BSEE announced a new pilot inspection program for offshore facilities. Compliance with any new requirements of OPA may substantially impact our cost of operations or require us to incur additional expenses to comply with any new regulatory initiatives or statutes. Through our P&I Club membership, we expect to maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. The CWA prohibits the discharge of oil, hazardous substances and ballast water in United States navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. Furthermore, many in the United States that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than United States federal law. The EPA and USCG have enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering United States waters. The EPA regulates the discharge of ballast and bilge water and other substances in United States waters under the CWA. The EPA regulations require vessels 79 feet in length or longer (other than commercial fishing vessels and recreational vessels) to comply with a Vessel General Permit, or VGP, authorizing ballast and bilge water discharges and other discharges incidental to the operation of vessels. For a new vessel delivered to an owner or operator after September 19, 2009 to be covered by the VGP, the owner must submit a Notice of Intent at least 30 days before the vessel operates in United States waters. The VGP imposes technology and water-quality based effluent limits for certain types of discharges and establishes specific inspection, monitoring, record-keeping and reporting requirements to ensure the effluent limits are met. On March 28, 2013, the EPA re-issued the VGP for another five years, effective from December 19, 2013. The new VGP focuses on authorizing discharges incidental to operations of commercial vessels, and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in United States waters, more stringent requirements for exhaust gas scrubbers, and the use of environmentally acceptable lubricants. In addition, under Section 401 of the CWA, the VGP must be certified by the state where the discharge is to take place. Certain states have enacted additional discharge standards as conditions to their certification of the VGP. These local standards bring the VGP into compliance with more stringent state requirements, such as those further restricting ballast water discharges and preventing the introduction of non-indigenous species considered to be invasive. The VGP and its state- specific regulations and any similar restrictions enacted in the future will increase the costs of operating in the relevant waters. The USCG regulations intended to align with international maritime security standards, exempt from MTSA vessel security measures non- United States vessels provided that such vessels have on board a valid ISSC that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. We have implemented the various security measures addressed by MTSA, SOLAS and the ISPS Code, and our fleet is in compliance with applicable security requirements. 36 Notwithstanding the foregoing, as of January 1, 2014, vessels are technically subject to the phasing-in of these standards. As a result, the USCG has provided waivers to vessels which cannot install the as-yet unapproved technology. The EPA, on the other hand, has taken a different approach to enforcing ballast discharge standards under the VGP. On December 27, 2013, the EPA issued an enforcement response policy in connection with the new VGP in which the EPA indicated that it would take into account the reasons why vessels do not have the requisite technology installed, but will not grant any waivers. It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remain in effect until the EPA issues a new VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and IMO BWM Convention, some of which are in effect and some which are pending, will co- exist. The United States Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels will be subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes will be equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to adopt State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas will be equipped with vapor recovery systems that satisfy these existing requirements. Compliance with the EPA and the USCG regulations could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering United States waters. European Union Regulations In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. Member States were required to enact laws or regulations to comply with the directive by the end of 2010. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, flag, and the number of times the ship has been detained. The European Union also adopted and then extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Greenhouse Gas Regulation Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. The 2015 United Nations Convention on Climate Change Conference in Paris did not result in an agreement that directly limited greenhouse gas emissions for ships. As of January 1, 2013, all new ships must comply with two new sets of mandatory requirements to address greenhouse gas emissions from ships which were adopted by MEPC, in July 2011. Currently operating ships are required to develop Ship Energy Efficiency Management Plans, and minimum energy efficiency levels per capacity mile, outlined in the Energy Efficiency Design Index, will apply to new ships. These requirements could cause us to incur additional compliance costs. The IMO is also planning to implement market-based mechanisms to reduce greenhouse gas emissions from ships at an upcoming MEPC session. The EU has indicated that it intends to propose an expansion of the existing EU emissions trading scheme to include emissions of greenhouse gases from marine vessels, and in January 2012, the EU launched a public consultation on possible measures to reduce greenhouse gas emissions from ships. In April 2015, a regulation was adopted requiring that large ships (over 5,000 gross tons) calling at EU ports from January 2018 collect and publish data on carbon dioxide emissions and other information. For 2020, the EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels. The EU also committed to reduce its 37 emissions by 20% under the Kyoto Protocol’s second period, from 2013 to 2020. In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources and large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, such regulation of vessels is foreseeable, and the EPA has in recent years received petitions from the California Attorney General and various environmental groups seeking such regulation. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the United States or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol, that restrict emissions of greenhouse gases could require us to make significant financial expenditures, including capital expenditures to upgrade our vessels, which we cannot predict with certainty at this time. International Labour Organization The International Labour Organization, or the ILO, is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006, or the MLC 2006. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 entered into force on August 20, 2013. The MLC 2006 requires us to develop new procedures to ensure full compliance with its requirements. Vessel Security Regulations Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the United States Maritime Transportation Security Act of 2002, or the MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. The regulations also impose requirements on certain ports and facilities, some of which are regulated by the EPA. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new Chapter XI-2 became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel’s flag state. Among the various requirements are: • on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship’s identity, position, course, speed and navigational status; • on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; • the development of vessel security plans; • ship identification number to be permanently marked on a vessel’s hull; • a continuous synopsis record kept onboard showing a vessel’s history, including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship’s identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and • compliance with flag state security certification requirements. Ships operating without a valid certificate, may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port. The USCG regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non United States vessels provided that such vessels have on board a valid ISSC that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. We have implemented the various security measures addressed by MTSA, SOLAS and the ISPS Code, and our fleet is in compliance with applicable security requirements. 38 Inspection by classification societies Every seagoing vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in class,’’ signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned. The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned. For maintenance of the class, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any special equipment classed are required to be performed as follows: • Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant, and where applicable for special equipment classed, within three months before or after each anniversary date of the date of commencement of the class period indicated in the certificate. • Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys are to be carried out at or between the occasion of the second or third annual survey. • Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery, including the electrical plant, and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey, the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of money may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a vessel owner has the option of arranging with the classification society for the vessel’s hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. At an owner’s application, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal. All areas subject to survey as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each area must not exceed five years. Most vessels are also dry-docked every 30 to 36 months for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a “recommendation’’ which must be rectified by the ship owner within prescribed time limits. Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in-class” by a classification society which is a member of the International Association of Classification Societies, or IACS. In December 2013 the IACS adopted new harmonized Common Structure Rules which will apply to oil tankers and bulk carriers to be constructed on or after July 1, 2015. All our vessels are certified as being “in-class” by American Bureau of Shipping and Det Norske Veritas. All new and secondhand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and memoranda of agreement. If the vessel is not certified on the scheduled date of closing, we have no obligation to take delivery of the vessel. In addition to the classification inspections, many of our customers regularly inspect our vessels as a precondition to chartering them for voyages. We believe that our well-maintained, high-quality vessels provide us with a competitive advantage in the current environment of increasing regulation and customer emphasis on quality. 39 Risk of Loss and Liability Insurance General The operation of any cargo vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which in certain circumstances imposes virtually unlimited liability upon owners, operators and demise charterers of any vessel trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for vessel- owners and operators trading in the United States market. While we believe that our present insurance coverage is adequate, not all risks can be insured against, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. Marine and War Risks Insurance We have in force marine and war risks insurance for all of our vessels. Our marine hull and machinery insurance covers risks of particular average and actual or constructive total loss from collision, fire, grounding, engine breakdown and other insured named perils up to an agreed amount per vessel. Our war risks insurance covers the risks of particular average and actual or constructive total loss from confiscation, seizure, capture, vandalism, sabotage, and other war-related named perils. Each vessel is covered up to at least its fair market value at the time of the insurance attachment and subject to a fixed deductible per each single accident or occurrence, but excluding actual or constructive total loss. Protection and Indemnity Insurance Protection and indemnity (P&I) insurance is provided by mutual protection and indemnity associations, commonly referred to as P&I Clubs, and provides unlimited coverage, except for pollution which is capped as discussed below. P&I insurance covers our third-party liabilities in connection with our shipping activities. This includes liability and other related expenses resulting from injury, illness or death of crew, passengers and other third parties, loss of or damage to cargo, claims arising from collisions with other vessels, damage to third-party property including piers and other fixed or floating objects, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. As a member of a P&I Club that is, in turn, a member of the International Group of P&I Clubs we carry protection and indemnity insurance coverage for pollution of $1 billion per vessel per incident. The P&I Clubs that comprise the International Group insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each Club’s liabilities. Although the P&I Clubs compete with each other for business, they have found it beneficial to pool their larger risks under the auspices of the International Group. This pooling is regulated by a contractual agreement which defines the risks that are to be pooled and exactly how these risks are to be shared by the participating P&I Clubs. We are subject to calls payable to the Clubs of which we are members based on its claim records as well as the claim records of all other members of the individual Clubs and members of the pool of P&I Clubs comprising the International Group. C. Organizational Structure Please see Exhibit 8.1 to this annual report for a list of our current significant subsidiaries. D. Property, Plants and Equipment For a description of our fleet, see “Item 4. Information on the Company—B. Business Overview.” ITEM 4A. UNRESOLVED STAFF COMMENTS None. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following presentation of management’s discussion and analysis of results of operations and financial condition should be read in conjunction with our consolidated financial statements, accompanying notes thereto and other financial information appearing in Item 18. “Financial Statements.” You should also carefully read the following discussion with the sections of this annual report entitled “Item 3. Key Information—D. Risk Factors,” “Item 4. Information on the Company— B. Business Overview—The International Oil Tanker Shipping Industry,” and “Cautionary Statement Regarding Forward- 40 Looking Statements.” Our consolidated financial statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013 have been prepared in accordance with IFRS as issued by the IASB. Our consolidated financial statements are presented in U.S. dollars ($) unless otherwise indicated. Any amounts converted from another non- U.S. currency to U.S. dollars in this annual report are at the rate applicable at the relevant date, or the average rate during the applicable period. We generate revenues by charging customers for the transportation of their refined oil and other petroleum products using our vessels. Historically, these services generally have been provided under the following basic types of contractual relationships: • Voyage charters, which are charters for short intervals that are priced on current, or “spot,” market rates. • Time charters, which are chartered to customers for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates. • Commercial Pools, whereby we participate with other shipowners to operate a large number of vessels as an integrated transportation system, which offers customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools negotiate charters primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs (described below), thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market. • For all types of vessels in contractual relationships, we are responsible for crewing and other vessel operating costs for our owned vessels and the charterhire expense for vessels that we time charter-in. The table below illustrates the primary distinctions among these different employment arrangements: Typical contract length ........................................ Hire rate basis(1) ................................................... Voyage expenses(2) .............................................. Vessel operating costs for owned vessels(3) ......... Charterhire expense for vessels chartered-in(3) .... Off-hire(4) ............................................................. Customer does not pay Customer does not pay Time Charter One year or more Daily Customer pays We pay We pay Voyage Charter Single voyage Varies We pay We pay We pay Commercial Pool Varies Varies Pool pays We pay We pay Pool does not pay (1) “Hire rate” refers to the basic payment from the charterer for the use of the vessel. (2) “Voyage expenses” refers to expenses incurred due to a vessel’s traveling from a loading port to a discharging port, such as fuel (bunker) cost, port expenses, agent’s fees, canal dues and extra war risk insurance, as well as commissions. (3) “Vessel operating costs” and “Charterhire expense” are defined below under “—Important Financial and Operational Terms and Concepts.” (4) “Off-hire” refers to the time a vessel is not available for service due primarily to scheduled and unscheduled repairs or drydockings. For time chartered-in vessels, we do not pay the charterhire expense when the vessel is off-hire. As of March 17, 2016, all of our owned and time chartered-in vessels were operating in the Scorpio Group Pools except STI Texas City, STI Notting Hill, STI Westminster, STI Poplar, STI Pimlico and STI Rose. STI Texas City is on a two year time charter-out agreement expiring in March 2016, and STI Notting Hill, STI Westminster, STI Poplar, STI Pimlico and STI Rose are on three year time charter-out agreements that are scheduled to expire in the fourth quarter of 2018 and the first quarter of 2019. Important Financial and Operational Terms and Concepts We use a variety of financial and operational terms and concepts. These include the following: Vessel revenues. Vessel revenues primarily include revenues from time charters, pool revenues and voyage charters (in the spot market). Vessel revenues are affected by hire rates and the number of days a vessel operates. Vessel revenues are also affected by the mix of business between vessels on time charter, vessels in pools and vessels operating on voyage charter. Revenues from vessels in pools and on voyage charter are more volatile, as they are typically tied to prevailing market rates. 41 Voyage charters. Voyage charters or spot voyages are charters under which the customer pays a transportation charge for the movement of a specific cargo between two or more specified ports. We pay all of the voyage expenses under these charters. Voyage expenses. Voyage expenses primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters. These expenses are subtracted from voyage charter revenues to calculate TCE revenues. Vessel operating costs. For our owned vessels, we are responsible for vessel operating costs, which include crewing, repairs and maintenance, insurance, spares and stores, lube oils, communication expenses, and technical management fees. The three largest components of our vessel operating costs are crewing, spares and stores and repairs and maintenance. Expenses for repairs and maintenance tend to fluctuate from period to period because most repairs and maintenance typically occur during periodic drydocking. Please read “Drydocking” below. We expect these expenses to increase as our fleet matures and to the extent that it expands. Additionally, these costs include technical management fees that we paid to SSM, which is controlled by the Lolli- Ghetti family. Pursuant to our Master Agreement, SSM provides us with technical services, and we provide them with the ability to subcontract technical management of our vessels with our approval. Charterhire. Charterhire is the amount we pay the owner for time chartered-in vessels. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs. Drydocking. We periodically drydock each of our owned vessels for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. Generally, each vessel is drydocked every 30 months to 60 months. We capitalize a substantial portion of the costs incurred during drydocking and amortize those costs on a straight-line basis from the completion of a drydocking to the estimated completion of the next drydocking. We immediately expense costs for routine repairs and maintenance performed during drydocking that do not improve or extend the useful lives of the assets. The number of drydockings undertaken in a given period and the nature of the work performed determine the level of drydocking expenditures. Depreciation. Depreciation expense typically consists of: • • charges related to the depreciation of the historical cost of our owned vessels (less an estimated residual value) over the estimated useful lives of the vessels; and charges related to the amortization of drydocking expenditures over the estimated number of years to the next scheduled drydocking. Time charter equivalent (TCE) revenue or rates. We report TCE revenues, a non-IFRS measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable IFRS measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors. TCE revenue is vessel revenue less voyage expenses, including bunkers and port charges. The TCE rate achieved on a given voyage is expressed in U.S. dollars/day and is generally calculated by taking TCE revenue and dividing that figure by the number of revenue days in the period. For a reconciliation of TCE revenue, deduct voyage expenses from revenue on our consolidated statements of income. Revenue days. Revenue days are the total number of calendar days our vessels were in our possession during a period, less the total number of off-hire days during the period associated with major repairs or drydockings. Consequently, revenue days represent the total number of days available for the vessel to earn revenue. Idle days, which are days when a vessel is available to earn revenue, yet is not employed, are included in revenue days. We use revenue days to show changes in net vessel revenues between periods. Average number of vessels. Historical average number of owned vessels consists of the average number of vessels that were in our possession during a period. We use average number of vessels primarily to highlight changes in vessel operating costs and depreciation and amortization. 42 Contract of affreightment. A contract of affreightment, or COA, relates to the carriage of specific quantities of cargo with multiple voyages over the same route and over a specific period of time which usually spans a number of years. A COA does not designate the specific vessels or voyage schedules that will transport the cargo, thereby providing both the charterer and shipowner greater operating flexibility than with voyage charters alone. The charterer has the flexibility to determine the individual voyage scheduling at a future date while the shipowner may use different vessels to perform these individual voyages. As a result, COAs are mostly entered into by large fleet operators, such as pools or shipowners with large fleets of the same vessel type. We pay the voyage expenses while the freight rate normally is agreed on a per cargo ton basis. Commercial pools. To increase vessel utilization and revenues, we participate in commercial pools with other shipowners and operators of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers. Operating days. Operating days are the total number of available days in a period with respect to the owned vessels, before deducting available days due to off-hire days and days in drydock. Operating days is a measurement that is only applicable to our owned vessels, not our chartered-in vessels. Items You Should Consider When Evaluating Our Results You should consider the following factors when evaluating our historical financial performance and assessing our future prospects: Our vessel revenues are affected by cyclicality in the tanker markets. The cyclical nature of the tanker industry causes significant increases or decreases in the revenue we earn from our vessels, particularly those vessels we trade in the spot market. We employ a chartering strategy to capture upside opportunities in the spot market while using fixed-rate time charters to reduce downside risks, depending on SCM’s outlook for freight rates, oil tanker market conditions and global economic conditions. Historically, the tanker industry has been cyclical, experiencing volatility in profitability due to changes in the supply of, and demand for, tanker capacity. The supply of tanker capacity is influenced by the number and size of new vessels built, vessels scrapped, converted and lost, the number of vessels that are out of service, and regulations that may effectively cause early obsolescence of tonnage. The demand for tanker capacity is influenced by, among other factors: • global and regional economic and political conditions; • • • increases and decreases in production of and demand for crude oil and petroleum products; increases and decreases in OPEC oil production quotas; the distance crude oil and petroleum products need to be transported by sea; and • developments in international trade and changes in seaborne and other transportation patterns. Tanker rates also fluctuate based on seasonal variations in demand. Tanker markets are typically stronger in the winter months as a result of increased oil consumption in the northern hemisphere but weaker in the summer months as a result of lower oil consumption in the northern hemisphere and refinery maintenance that is typically conducted in the summer months. In addition, unpredictable weather patterns during the winter months in the northern hemisphere tend to disrupt vessel routing and scheduling. The oil price volatility resulting from these factors has historically led to increased oil trading activities in the winter months. As a result, revenues generated by our vessels have historically been weaker during the quarters ended June 30 and September 30, and stronger in the quarters ended March 31 and December 31. Our general and administrative expenses were affected by the fees we pay SCM and SSH for commercial management and administrative services respectively. SCM and SSH, companies controlled by the Lolli-Ghetti family of which our founder, Chairman and Chief Executive Officer and our Vice President are members, provide commercial and administrative management services to us, respectively. We pay fees under our Master Agreement with SCM, for our vessels that operate both within and outside of the Scorpio Group Pools. The fees charged to our vessels operating within the Scorpio Group Pools are identical to what SCM charges third-party owned vessels operating within the Scorpio Group Pools. We reimburse our Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. We also pay our Administrator a fee for arranging vessel purchases and sales for us equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. We believe this 1% fee on purchases and sales is customary in the tanker industry. 43 Critical Accounting Policies In the application of the accounting policies, we are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant judgments and estimates are as follows: Revenue recognition We currently generate most of our revenue from vessels operating in pools or in the spot market and from time to time we also employ our vessels on time charters. Revenue recognition for time charters and pools is generally not as complex or as subjective as voyage charters (spot voyages). Time charters are for a specific period of time at a specific rate per day. For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter. Pool revenues are determined by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set out in the pool agreement. We generated revenue from spot voyages during the year ended December 31, 2015. Within the shipping industry, there are two methods used to account for spot voyage revenue: (1) ratably over the estimated length of each voyage or (2) completed voyage. The recognition of voyage revenues ratably over the estimated length of each voyage is the most prevalent method of accounting for voyage revenues and the method used by us. Under each method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. In applying our revenue recognition method, we believe that the discharge-to-discharge basis of calculating voyages more accurately estimates voyage results than the load-to-load basis. In the application of this policy, we do not begin recognizing revenue until (i) the amount of revenue can be measured reliably, (ii) it is probable that the economic benefits associated with the transaction will flow to the entity, (iii) the transactions stage of completion at the balance sheet date can be measured reliably and (iv) the costs incurred and the costs to complete the transaction can be measured reliably. Vessel impairment Impairment methodology The carrying values of our vessels may not represent their fair market value at any point in time since the market prices of second-hand vessels fluctuate with changes in charter rates and the cost of constructing new vessels. At each reporting period end date, we review the carrying amounts of our vessels to determine whether there is any indication that those vessels may have suffered an impairment loss. In this regard, fluctuations in market values below carrying values are considered to represent an impairment triggering event that necessitates performance of a full impairment review. Impairment losses are calculated as the excess of a vessel’s carrying amount over its recoverable amount. Under IFRS, the recoverable amount is the higher of an asset’s (i) fair value less costs to sell and (ii) value in use. Fair value less costs to sell is defined by IFRS as “the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.” When we calculate value in use, we discount the expected future cash flows to be generated by our vessels to their net present value. Our impairment evaluation is performed on an individual vessel basis when there are indications of impairments. First, we assess the fair value less the cost to sell our vessels taking into consideration vessel valuations from leading, independent and internationally recognized ship brokers. We then compare that estimate of market values (less an estimate of selling costs) to each vessel’s carrying value and, if the carrying value exceeds the vessel’s market value, an indicator of impairment exists. The indicator of impairment prompts us to perform a calculation of the potentially impaired vessel’s value in use, in order to appropriately determine the ‘higher of’ the two values. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. In developing estimates of future cash flows, we make assumptions about future charter rates, vessel operating expenses, the estimated remaining useful lives of the vessels and the discount rate. These assumptions are based on historical trends as well as future expectations. Although management believes that the 44 assumptions used to evaluate potential impairment are reasonable and appropriate, such assumptions are highly subjective. Reasonable changes in the assumptions for the discount rate or future charter rates could lead to a value in use for some of our vessels that is equal to or less than the carrying amount for such vessels. All of the aforementioned assumptions have been highly volatile in both the current market and historically. For the year ended December 31, 2015, we performed an assessment as described above. The results of this assessment are described as follows for the 80 vessels in our fleet (including STI Lombard, which is bareboat chartered-in under a finance lease agreement) and 12 vessels under construction at December 31, 2015: • 50 vessels had fair values less costs to sell in excess of their carrying amount. • 30 vessels had fair values less costs to sell less than their carrying amount which served as indicators of impairment. We performed a value in use calculation for each of these vessels which resulted in no impairment being recognized. We did not obtain independent broker valuations for the 12 vessels under construction at December 31, 2015. In line with our policy we performed a value in use calculation where we estimated each vessels’ future cash flows based on a combination of the latest forecast time charter rates for the next three years (obtained from a third-party service provider), a growth rate of 3.0% in freight rates for each period thereafter, and our best estimate of vessel operating expenses and drydock costs, which also assume a growth rate of 3.0% in each succeeding year. These cash flows were then discounted to their present value using a discount rate of 8.54%. The value in use calculations were greater than the fair value less costs to sell in all instances. As a result of this testing, no impairment was recorded. For the year ended December 31, 2014, we had 57 vessels in our fleet and 24 vessels under construction: • Three vessels were designated as held for sale and, in accordance with our accounting policy for vessels held for sale, were written down to their fair value less costs to sell. • 36 vessels had fair values less costs to sell in excess of their carrying amount. • 18 vessels had fair values less costs to sell less than their carrying amount which served as indicators of impairment. We prepared a value in use calculation for each of these vessels which resulted in no impairment being recognized. We did not obtain independent broker valuations for the 24 vessels under construction at December 31, 2014. In line with our policy we performed a value in use calculation where we estimated each vessels’ future cash flows based on a combination of the latest forecast time charter rates for the next three years (obtained from a third-party service provider), a growth rate of 3.0% in freight rates for each period thereafter, and our best estimate of vessel operating expenses and drydock costs, which also assume a growth rate of 3.0% in each succeeding year. These cash flows were then discounted to their present value using a discount rate of 7.98%. The value in use calculations were greater than the fair value less costs to sell in all instances. As a result of this testing, no impairment was recorded. Our Fleet—Illustrative comparison of excess of carrying amounts over estimated charter-free market value of certain vessels During the past few years, the market values of vessels have experienced particular volatility and as a result, the charter-free market value, or basic market value, of certain of our vessels may have declined below the carrying amounts of those vessels. After undergoing the impairment analysis discussed above, we have concluded that no impairment is required at December 31, 2015. The table set forth below indicates the carrying amount of each of our vessels as of December 31, 2015 and December 31, 2014 and the aggregate difference between the carrying amount and the market value represented by such vessels (see footnotes to the table set forth below). This aggregate difference represents the approximate analysis of the amount by which we believe we would record a loss if we sold those vessels, in the current environment, on industry standard terms, in cash transactions and to a willing buyer where we are not under any compulsion to sell, and where the buyer is not under any compulsion to buy. For purposes of this calculation, we have assumed that the vessels would be sold at a price that reflects our estimate of their basic market values. Our estimate of basic market value assumes that our vessels are all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including: 45 • reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values; • news and industry reports of similar vessel sales; • news and industry reports of sales of vessels that are not similar to our vessels where we have made certain adjustments in an attempt to derive information that can be used as part of our estimates; • approximate market values for our vessels or similar vessels that we have received from shipbrokers, whether solicited or unsolicited, or that shipbrokers have generally disseminated; • offers that we may have received from potential purchasers of our vessels; and • vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers. As we obtain information from various industry and other sources, our estimates of basic market value are inherently uncertain. In addition, vessel values and revenues are highly volatile; as such, our estimates may not be indicative of the current or future basic market value of our vessels or prices that we could achieve if we were to sell them. In millions of U.S. dollars Vessel Name STI Highlander .......................................................... STI Harmony ............................................................. STI Heritage .............................................................. Venice........................................................................ STI Amber ................................................................. STI Topaz .................................................................. STI Ruby ................................................................... STI Garnet ................................................................. STI Onyx ................................................................... STI Sapphire .............................................................. STI Emerald .............................................................. STI Beryl ................................................................... STI Le Rocher ........................................................... STI Larvotto .............................................................. STI Fontvieille ........................................................... STI Ville .................................................................... STI Duchessa ............................................................. STI Wembley ............................................................ STI Opera .................................................................. STI Texas City ........................................................... STI Meraux................................................................ STI San Antonio ........................................................ STI Venere ................................................................ STI Virtus .................................................................. STI Aqua ................................................................... STI Dama .................................................................. STI Mythos ................................................................ STI Benicia ................................................................ STI Regina ................................................................. STI St. Charles .......................................................... STI Yorkville ............................................................. STI Milwaukee .......................................................... STI Battery ................................................................ STI Brixton ................................................................ STI Comandante ........................................................ STI Pimlico................................................................ STI Hackney .............................................................. STI Acton .................................................................. STI Fulham ................................................................ STI Camden ............................................................... STI Finchley .............................................................. STI Clapham .............................................................. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Year Built 2007 2007 2008 2001 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 46 Carrying value as of, December 31, 2015 December 31, 2014 N/A N/A N/A N/A 34.0(2) 34.1(2) 34.2(2) 34.3(2) 34.3(2) 34.1(2) 34.0(2) 33.2(3) 33.7(2) 33.7(2) 33.7(2) 34.0(2) 32.2(3) 31.5(3) 32.0(3) 36.4(2) 36.8(2) 36.9(2) 32.0(3) 32.1(3) 32.3(3) 32.3(3) 32.0(3) 37.7(2) 32.5(3) 36.3(2) 32.9(3) 38.9(2) 33.1(3) 30.9(3) 30.7(3) 31.0(3) 30.9(3) 31.5(3) 31.2(3) 31.1(3) 31.4(3) 31.7(3) 20.7(1) 28.8(1) 30.2(1) 11.9(1) 35.5 35.7 35.7 35.8 35.8 35.6 35.4 34.6 35.1 35.1 35.1 35.5 33.5 32.7 33.3 37.9 38.3 38.4 33.3 33.4 33.6 33.6 33.5 39.2 33.8 37.7 34.2 40.3 34.3 32.2 32.0 32.4 32.3 32.7 32.5 32.5 32.6 32.7 In millions of U.S. dollars Vessel Name STI Poplar ................................................................ STI Elysees ............................................................... STI Madison ............................................................. STI Park ................................................................... STI Orchard .............................................................. STI Sloane ................................................................ STI Broadway .......................................................... STI Condotti ............................................................. STI Battersea ............................................................ STI Chelsea .............................................................. STI Lexington .......................................................... STI Powai ................................................................. STI Mayfair .............................................................. STI Soho ................................................................... STI Olivia ................................................................. STI Tribeca ............................................................... STI Hammersmith .................................................... STI Rotherhithe ........................................................ STI Rose ................................................................... STI Gramercy ........................................................... STI Veneto ............................................................... STI Alexis ................................................................ STI Bronx ................................................................. STI Pontiac ............................................................... STI Manhattan .......................................................... STI Winnie ............................................................... STI Oxford ............................................................... STI Queens ............................................................... STI Osceola .............................................................. STI Lauren ................................................................ STI Connaught ......................................................... STI Notting Hill........................................................ STI Spiga .................................................................. STI Seneca ................................................................ STI Savile Row ........................................................ STI Westminster ....................................................... STI Brooklyn ............................................................ STI Kingsway ........................................................... STI Memphis ............................................................ STI Lombard ............................................................ STI Carnaby ............................................................. STI Black Hawk ....................................................... 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 Year Built December 31, 2015 December 31, 2014 Carrying value as of, 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 31.7 (3) 50.1 (3) 50.4 (3) 50.4 (3) 50.0 (3) 50.9 (3) 49.9 (3) 50.9 (3) 31.2 (3) 32.2 (3) 32.2 (3) 32.2 (3) 33.5 (3) 33.0 (3) 32.3 (3) 34.0 (3) 32.1 (3) 32.2 (3) 59.1 (2) 33.2 (3) 51.1 (3) 59.3 (2) 34.0 (3) 38.9 (2) 33.9 (3) 52.1 (3) 52.3 (3) 33.9 (3) 39.3 (2) 52.3 (3) 52.0 (3) 37.7 (2) 58.3 (3) 39.4 (2) 59.5 (2) 37.9 (2) 34.1 (3) 59.8 (2) 37.1 (2) 60.1 (2) 60.1 (2) 37.5 (2) 32.7 52.0 52.3 52.3 51.8 52.6 51.7 52.8 32.4 33.6 33.5 33.5 34.6 33.9 33.7 N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) N/A(4) $ 3,087.7 $ 2,042.8 (1) Venice, STI Heritage, STI Harmony and STI Highlander were sold in March 2015, April 2015, April 2015 and October 2015, respectively. (2) As of December 31, 2015, the basic charter-free market value is lower than each vessel’s carrying value. We believe that the aggregate carrying value of these vessels exceeds their aggregate basic charter-free market value by approximately $35.5 million. (3) As of December 31, 2015, the basic charter-free market value is higher than each vessel’s carrying value. We believe that the aggregate basic charter-free market value of these vessels exceeds their aggregate carrying value by approximately $178.2 million. (4) These vessels were acquired during the year ended December 31, 2015. The impairment test that we conduct is most sensitive to variances in the discount rate and future time charter rates. Based on the sensitivity analysis performed for December 31, 2015, a 1.0% increase in the discount rate would result in no impairment being recognized. Alternatively, a 5% decrease in forecasted time charter rates would also result in no impairment being recognized. 47 We refer you to the discussion herein under “Item 3. Key Information—D. Risk Factors—Risks Related to our Industry,” including the risk factor entitled “Declines in charter rates and other market deterioration could cause us to incur impairment charges.” Vessel lives and residual value The carrying value of each of our vessels represents its original cost at the time it was delivered or purchased less depreciation and impairment. We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives of 25 years. The estimated useful life of 25 years is management’s best estimate and is also consistent with industry practice for similar vessels. The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value per ton. The scrap value per ton is estimated taking into consideration the historical four year scrap market rate average, which we update annually. An increase in the estimated useful life of a vessel or in its scrap value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or scrap value would have the effect of increasing the annual depreciation charge. When regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel’s useful life is adjusted to end at the date such regulations become effective. No such regulations have been identified that would have impacted the estimated useful life of our vessels. The estimated salvage value of the vessels may not represent the fair market value at any one time since market prices of scrap values tend to fluctuate. Deferred drydock cost We recognize drydock costs as a separate component of the vessels’ carrying amounts and amortize the drydock cost on a straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between which drydocks are performed, which can result in adjustments to the estimated amortization of the drydock expense. If the vessel is disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain or loss recognized upon disposal of vessels in the period when contracted. We expect that our vessels will be required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and supplies used in making such repairs. We only include in deferred drydocking costs those direct costs that are incurred as part of the drydocking to meet regulatory requirements, or are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard. Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not, are expensed as incurred. A. Operating Results Results of Operations for the year ended December 31, 2015 compared to the year ended December 31, 2014 For the year ended December 31, Percentage Change Change In thousands of U.S. dollars Vessel revenue ........................................................................................ $ 755,711 $ 342,807 $ 412,904 (95,733) Vessel operating costs ............................................................................. 3,101 Voyage expenses .................................................................................... 42,303 Charterhire .............................................................................................. (64,739) Depreciation ............................................................................................ General and administrative expenses ...................................................... (17,702) Write down of vessels held for sale and net loss from (174,556) (4,432) (96,865) (107,356) (65,831) (78,823 ) (7,533 ) (139,168 ) (42,617 ) (48,129 ) 2015 2014 sales of vessels .................................................................................... Write-off of vessel purchase options ...................................................... Gain on sale of VLCCs ........................................................................... Gain on sale of Dorian shares ................................................................. Re-measurement of investment in Dorian .............................................. Financial expenses .................................................................................. Realized gain on derivative financial instruments .................................. Unrealized (loss) / gain on derivative financial instruments ................... Financial income ..................................................................................... Share of profit from associate ................................................................. Other expenses, net ................................................................................. Net income .............................................................................................. $ 217,749 $ 55 (1,255) 145 — 1,316 (35) (731) — 1,179 — (89,596) (3,978 ) — 51,419 10,924 (13,895 ) (20,770 ) 3,943 (731) (51,419) (9,745) 13,895 (68,826) 38 (1,519) (58) (1,473) 1,419 52,091 $ 165,658 17 264 203 1,473 (103 ) 48 120 % (121)% 41 % 30 % (152)% (37)% 99 % N/A (100)% (89)% 100 % (331)% 224 % (575)% (29)% (100)% 1,378 % 318 % Net income. Net income for the year ended December 31, 2015 was $217.7 million, an increase of $165.7 million, or 318%, from net income of $52.1 million for the year ended December 31, 2014. The differences between the two periods are discussed below. Vessel revenue. Vessel revenue for the year ended December 31, 2015 was $755.7 million, an increase of $412.9 million, or 120%, from vessel revenue of $342.8 million for the year ended December 31, 2014. Overall revenue increases were driven by an increase in the average number of operating vessels (owned and time chartered-in) to 89.6 from 57.9 vessels during the years ended December 31, 2015 and 2014, respectively. Additionally, the increase in vessel revenue was also driven by an increase in overall TCE revenue per day to $23,163 per day from $15,935 per day during the years ended December 31, 2015 and 2014, respectively. The following is a summary of our consolidated revenue by revenue type, in addition to TCE revenue per day and total revenue days. For the year ended December 31, Percentage In thousands of U.S. dollars Pool revenue ....................................................................................... $ 697,406 $ 280,857 $ 416,549 (9,853) Voyage revenue (spot market) ............................................................ 6,358 Time charter-out revenue .................................................................... (150) Other revenue ..................................................................................... 412,904 Gross revenue ..................................................................................... Voyage expenses ................................................................................ 3,101 TCE revenue (1) ................................................................................... 416,005 48,112 13,538 300 342,807 38,259 19,896 150 755,711 751,279 335,274 (4,432) (7,533) 2015 2014 Change Change TCE Revenue per day: (1) Pool ..................................................................................................... $ Time charter-out ................................................................................. Voyage ................................................................................................ Consolidated TCE revenue per day .................................................... 23,689 $ 18,553 17,596 23,163 15,837 $ 15,194 16,798 15,935 7,852 3,359 798 7,228 Revenue days: Pool - owned vessels ........................................................................... Pool - time chartered-in vessels .......................................................... Time-charter out - owned vessels ....................................................... Voyage - owned vessels ...................................................................... Voyage - time chartered-in vessels ..................................................... Total revenue days .............................................................................. 23,482 5,966 1,027 1,796 171 32,442 8,183 9,551 852 2,401 50 21,037 15,299 (3,585) 175 (605) 121 11,405 148 % (20)% 47 % (50)% 120 % 41 % 124 % 50 % 22 % 5 % 45 % 187 % (38)% 21 % (25)% 242 % 54 % (1) We report TCE revenues, a non-IFRS measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable IFRS measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors. Pool revenue. The increase in pool revenue was due to the growth of our fleet and improved market conditions across all of our operating segments. 27 vessels were delivered in 2015 (including 26 delivered under our Newbuilding Program) which resulted in our average number of owned vessels to increase to 72.7 from 31.6 vessels during the years ended December 31, 2015 and 2014, respectively. The growth of our owned fleet was offset by a decrease in the size of our time chartered-in fleet to an average of 16.9 from 26.3 vessels during the years ended December 31, 2015 and 2014, respectively. Furthermore, pool TCE revenue per day also improved to $23,689 per day from $15,837 per day, during the years ended December 31, 2015 and 2014, respectively, as we experienced improved market conditions in each of our vessel classes throughout 2015. The drivers of these improvements are discussed below within results of operations - segment analysis. Voyage revenue (spot market). Voyage revenue (spot revenue) for the year ended December 31, 2015 was $38.3 million, a decrease of $9.8 million, or 20%, from $48.1 million for the year ended December 31, 2014. 49 This revenue can be broken down as follows: • Short-term time charters: We consider short-term time charters (less than one year) as spot market voyages. Vessels delivered under our Newbuilding Program during 2015 were employed on short-term time charters (up to 120 days) for a total of 1,914 days during the year ended December 31, 2015 and earned TCE revenues of $18,124 per day. Vessels delivered under our Newbuilding Program were employed on similar short-term time charters for a total of 2,177 days during the year ended December 31, 2014 and earned TCE revenues of $16,089 per day. • Spot market voyages: SN Azzurra operated in the spot voyage for 53 days during the year ended December 31, 2015. Noemi, Senatore, Venice and SN Azzurra operated in the spot market for a total of 274 days during the year ended December 31, 2014. Time charter-out revenue. Time charter-out revenue (representing time charters with initial terms of one year or greater) for the year ended December 31, 2015 was $19.9 million, an increase of $6.4 million, or 47%, from $13.5 million for the year ended December 31, 2014. The increase in time charter-out revenue is the result of an increase in time charter-out revenue days to 1,027 days from 852 days and an increase in the TCE revenue earned to $18,553 per day from $15,194 per day for the years ended December 31, 2015 and 2014, respectively. Our time charter-out revenue is summarized as follows: • • In 2015, we entered into time charter-out agreements with an unrelated third-party for two ice-class 1B MR product tankers, STI Notting Hill and STI Westminster, each for three years at $20,500 per day. These time charters commenced in November and December 2015, respectively. In 2014, we took delivery of four MR product tankers under our Newbuilding Program that commenced long- term time charters upon their deliveries from the shipyard. STI Texas City began a two year time charter in March 2014 at $16,000 per day and STI Meraux, STI San Antonio and STI Benicia began one year time charterers in May 2014, May 2014 and September 2014, respectively, each at $15,500 per day. The charters for STI Meraux, STI San Antonio and STI Benicia expired during 2015. Each time charter had a 50% profit sharing provision whereby we split all of the vessels profits above the daily base rate with the charterer. As such, given the improvement in market fundamentals during 2015, the TCE rates earned on these vessels, after considering the profit sharing mechanisms, improved during the year ended December 31, 2015. Vessel operating costs. Vessel operating costs for the year ended December 31, 2015 were $174.6 million, an increase of $95.8 million, or 121%, from $78.8 million for the year ended December 31, 2014. Vessel operating days increased to 26,547 days from 11,548 days for the years ended December 31, 2015 and 2014, respectively. The increase in vessel operating days was offset by a decrease in vessel operating costs per day to $6,564 per day compared to $6,802 per day for the years ended December 31, 2015 and 2014, respectively. The increase in operating days was the result of the deliveries of 27 vessels (including 26 under our Newbuilding Program) throughout 2015 and 41 vessels during 2014, which operated for a full year during 2015. Voyage expenses. Voyage expenses for the year ended December 31, 2015 were $4.4 million, a decrease of $3.1 million, or 41%, from $7.5 million during the year ended December 31, 2014. The decrease in voyage expenses is primarily a result of the following: • Newbuilding vessels delivered (including vessels under our Newbuilding Program and one time chartered-in vessel) commencing short-term time charters (less than 120 days) upon their deliveries from the shipyard. While these time charters are agreed to at fixed TCE rates, they incurred voyage costs prior to their entry into the Scorpio Group Pools for items such as bunker expenses (to their first port of loading) and tank cleaning costs. The number of days for vessels on short-term time charter-out decreased to 1,914 days from 2,177 days for the years ended December 31, 2015 and 2014, respectively. • A decrease in the number of days vessels operated in the spot market (excluding short term time charters) to 53 days from 274 days during the years ended December 31, 2015 and 2014, respectively. • These decreases were offset by an increase in commercial management fees paid to SCM, a related party, for vessels employed on long-term time charters to $0.7 million from $0.3 million during the years ended December 31, 2015 and 2014, respectively. 50 Charterhire. Charterhire expense for the year ended December 31, 2015 was $96.9 million, a decrease of $42.3 million, or 30%, from $139.2 million during the year ended December 31, 2014. This decrease was the result of a decrease in the average number of time chartered-in vessels to 16.9 from 26.3 during the years ended December 31, 2015 and 2014, respectively. Depreciation. Depreciation expense for the year ended December 31, 2015 was $107.4 million, an increase of $64.7 million, or 152%, from $42.6 million during the year ended December 31, 2014. The increase was the result of an increase in the average number of owned vessels to 72.7 from 31.6 vessels for the years ended December 31, 2015 and 2014, respectively. General and administrative expenses. General and administrative expenses for the year ended December 31, 2015 were $65.8 million, an increase of $17.7 million, or 37%, from $48.1 million during the year ended December 31, 2014. The change was primarily driven by the growth of our fleet to an average of 89.6 owned and time chartered-in vessels from an average of 57.9 owned and time chartered-in vessels for the years ended December 31, 2015 and 2014, respectively. Write down of vessels held for sale and net loss from sales of vessels. Write down of vessels held for sale and loss from sales of vessels for the year ended December 31, 2015 was $35,000, a decrease of $4.0 million, or 99%, from $4.0 million during the year ended December 31, 2014. • During the year ended December 31, 2015, we recorded a loss of $2.1 million on the sale of STI Highlander in October 2015. This loss was offset by an aggregate gain of $2.0 million recorded for the sales of Venice, STI Harmony and STI Heritage, which were sold in March 2015, April 2015 and April 2015, respectively. • During the year ended December 31, 2014, we recorded a $4.0 million write-down as a result of the designation of STI Heritage and STI Harmony as held for sale and the corresponding write-down to the lower of their carrying value and fair value less estimated costs to sell at that date. Write-off of vessel purchase options. Write-off of vessel purchase options of $0.7 million during the year ended December 31, 2015 was the result of the write-off of deposits made for options to construct MR product tankers that expired unexercised in December 2015. Gain on sale of VLCCs. Gain on sale of VLCCs of $51.4 million during the year ended December 31, 2014 was the result of the sale of our seven VLCCs under construction in March 2014. As a result of the sale, we received net proceeds in cash of $141.7 million and the book value of these assets at the time of sale (primarily consisting of installment payments made to date) was $90.3 million. Gain on sale of Dorian shares. Gain on sale of Dorian shares for the year ended December 31, 2015 was $1.2 million, a decrease of $9.7 million or 89% from $10.9 million during the year ended December 31, 2014. • • In July 2015 we sold our investment in Dorian to two unrelated third parties and recorded an aggregate gain of $1.2 million. In June 2014, we acquired 7,500,000 of our common shares from an existing shareholder in exchange for 3,422,665 common shares of Dorian in a privately negotiated transaction. As a result of the disposal of the Dorian shares, we recognized a gain of $10.9 million. Re-measurement of investment in Dorian. Re-measurement of our investment in Dorian of $13.9 million during the year ended December 31, 2014 relates to a change in the accounting method for our investment in Dorian from the equity method to the available for sale method. On October 29, 2014, Robert Bugbee, our President, resigned from Dorian’s board of directors. Accordingly, we determined that we no longer had significant influence over Dorian’s financial and operating decisions as of that date. As such, we remeasured our investment to its fair market value on October 29, 2014, which resulted in a write down of $13.9 million. Financial expenses. Financial expenses for the year ended December 31, 2015 were $89.6 million, an increase of $68.8 million, or 331%, from $20.8 million during the year ended December 31, 2014. The change was primarily due to an increase in our average debt outstanding which increased to $1.9 billion from $783.9 million for the years ended December 31, 2015 and 2014, respectively. Additionally, the amount of interest capitalized decreased to $5.6 million from $17.5 million for the years ended December 31, 2015 and 2014, respectively, as a result of the decrease in the number of vessels under construction under our Newbuilding Program during those years. 51 • Financial expenses for the year ended December 31, 2015 primarily consisted of interest expense ($72.2 million) and amortization of loan fees ($17.4 million). • Financial expenses for the year ended December 31, 2014 primarily consisted of interest expense ($15.9 million) and amortization of loan fees ($4.8 million). Unrealized (loss) / gain on derivative financial instruments. Unrealized (loss) / gain on derivative financial instruments was a loss of $1.3 million for the year ended December 31, 2015 and a gain of $0.3 million for the year ended December 31, 2014. • The unrealized loss for the year ended December 31, 2015 results from the unrealized loss recorded on a profit and loss sharing arrangement whereby 50% of the profits and losses above or below the charterhire rate relating to an LR2 vessel that is time chartered-in by us, are shared with a third-party that neither owns nor operates this vessel. This agreement has been recorded as a derivative, recorded at fair value with any resultant gain or loss recognized in the consolidated statement of income. • The unrealized gain for the year ended December 31, 2014 relates to the adjustment to record interest rate swaps that did not qualify for hedge accounting, to their fair market value. These swaps were terminated in March 2015. Share of income from associate. Share of income from associate for the year ended December 31, 2014 of $1.5 million represents our share of Dorian’s income from January 1, 2014 through October 29, 2014 (the date we lost significant influence of Dorian’s financial and operating decisions and changed the accounting for this investment to the available for sale method from the equity method). Other expenses, net. Other expenses, net, representing income of $1.3 million during the year ended December 31, 2015, was primarily the result of a $1.4 million gain recorded as a result of a termination fee received when the owner of one of the Company’s time chartered-in vessels cancelled the contract prior to its expiration date. Results of operations — segment analysis During the years ended December 31, 2015, 2014 and 2013, we owned or chartered-in vessels across four different vessel classes, Handymax, MR, Panamax/LR1, and Aframax/LR2, all of which earn revenues in the seaborne transportation of refined petroleum products in the international shipping markets. Each vessel within its respective class qualifies as an operating segment under IFRS. However, each vessel also exhibits similar long-term financial performance and similar economic characteristics to the other vessels within the respective vessel class, thereby meeting the aggregation criteria under IFRS. We have therefore chosen to present our segment information by vessel class using the aggregated information from the individual vessels. Segment results are evaluated based on reported profit or loss from each segment. The accounting policies applied to the reportable segments are the same as those used in the preparation of our consolidated financial statements. LR2 Segment We took delivery of 12 LR2 product tankers under our Newbuilding Program during 2015 (which includes the delivery of STI Lombard, which was delivered in August 2015 under a bareboat charter-in arrangement for nine months at $10,000 per day, and which we are obligated to take ownership, and pay the remaining 90% of the contract price, or $53.1 million, at the conclusion of the bareboat charter). Our owned fleet of LR2 product tankers increased to an average of 14.6 vessels from 1.9 vessels during the years ended December 31, 2015 and 2014, respectively. Our time chartered-in fleet of LR2 product tankers decreased to an average of 4.0 vessels from 7.9 vessels during the years ended December 31, 2015 and 2014, respectively. 52 210 % (659)% (166)% 39 % (850)% (514)% N/A 100 % 1,100 % 783 % 64 % (1)% 655 % (50)% 656 % 668 % (49)% The following table summarizes segment profit for our LR2 segment. LR2 segment In thousands of U.S. dollars Vessel revenue ....................................................................................... $ 208,250 $ (36,682) Vessel operating costs ............................................................................ (194) Voyage expenses ................................................................................... (27,816) Charterhire ............................................................................................. (29,125) Depreciation ........................................................................................... (1,456) General and administrative expenses ..................................................... (1,255) Unrealized loss on derivative financial instruments .............................. — Financial expenses ................................................................................. Financial income .................................................................................... 12 Segment profit ....................................................................................... $ 111,734 $ 2014 67,124 $ 141,126 (31,852) (4,830) (121) (73) 17,940 (45,756) (26,058) (3,067) (1,219) (237) (1,255) — 509 (509) 11 1 12,653 $ 99,081 For the year ended December 31, Percentage 2015 Change Change TCE per revenue day ............................................................................. $ Owned vessel operating costs per day ................................................... Revenue days - owned vessels ............................................................... Revenue days - time chartered-in vessels .............................................. Owned vessel operating days ................................................................. Average number of owned vessels ........................................................ Average number of time chartered-in vessels ........................................ 30,544 $ 6,865 5,339 1,461 5,343 14.6 4.0 18,621 $ 11,923 (76) 6,789 4,632 707 (1,433) 2,894 4,636 707 12.7 1.9 (3.9) 7.9 Vessel revenue. Vessel revenue for the year ended December 31, 2015 was $208.3 million, an increase of $141.1 million, or 210%, from the year ended December 31, 2014. The increase was due to both an increase in TCE revenue per day and an increase in revenue days as a result of the growth in our LR2 fleet. We took delivery of the following LR2 product tankers under our Newbuilding Program during 2015: Vessel STI Rose ................................... STI Veneto ................................ STI Alexis ................................. STI Winnie ................................ STI Oxford ................................ STI Lauren ................................ STI Connaught .......................... STI Spiga .................................. STI Savile Row ......................... STI Kingsway ........................... STI Lombard ............................. STI Carnaby .............................. 1 2 3 4 5 6 7 8 9 10 11 12 Delivery Date January 2015 February 2015 February 2015 March 2015 April 2015 May 2015 May 2015 June 2015 June 2015 August 2015 August 2015 September 2015 (1) (1) STI Lombard was delivered in August 2015 under a bareboat charter-in agreement for up to nine months at $10,000 per day. We have the obligation to purchase the vessel at the conclusion of the bareboat charter and pay the remaining 90% of the contract price, or $53.1 million. TCE revenue per day increased to $30,544 from $18,621 per day during the years ended December 31, 2015 and 2014, respectively. This improvement was driven by an increase in worldwide demand for larger product tankers such as LR2s and LR1s as new refinery openings in the Middle East and India have resulted in longer haul voyages from those regions thus increasing overall ton-mile demand. Additionally, all of our operating segments have benefited from a decrease in bunker prices as a result of the decline in oil prices, which has had a positive impact on TCE revenue earned from our vessels operating in the Scorpio Group pools. Vessel operating costs. Vessel operating costs were $36.7 million for the year ended December 31, 2015, an increase of $31.9 million, or 659%, from the year ended December 31, 2014. The increase was primarily due to an increase of 4,632 operating days to 5,339 operating days from 707 operating days for the years ended December 31, 2015 and 2014, respectively, which was the result of the aforementioned increase in the size of our owned fleet over those periods. 53 Charterhire. Charterhire expense for the year ended December 31, 2015 was $27.8 million, a decrease of $17.9 million, or 39%, from the year ended December 31, 2014. The change was due to a decrease in the average number of time chartered-in vessels to 4.0 from 7.9 vessels during the years ended December 31, 2015 and 2014, respectively. Depreciation. Depreciation expense for the year ended December 31, 2015 was $29.1 million, an increase of $26.1 million, or 850%, from year ended December 31, 2014. The increase was the result of the delivery of 12 LR2 vessels under our Newbuilding Program during 2015 and seven vessels during 2014, which operated for the full year during 2015. General and administrative expenses. General and administrative expenses for the year ended December 31, 2015 were $1.5 million, an increase of $1.2 million, or 514%, from the year ended December 31, 2014. This increase was due to the significant growth of our LR2 fleet during those periods. Unrealized loss on derivative financial instruments. Unrealized loss on derivative financial instruments for the year ended December 31, 2015 was $1.3 million, which relates to the unrealized loss recorded on a profit and loss sharing arrangement whereby 50% of the profits and losses above or below the charterhire rate relating to an LR2 vessel that is time chartered-in by us are shared with a third-party that neither owns nor operates this vessel. This agreement has been recorded as a derivative, recorded at fair value with any resultant gain or loss recognized in the consolidated statement of income. Financial expenses. Financial expenses for the year ended December 31, 2014 were $0.5 million. Financial expenses for the LR2 segment related to interest expense on our STI Spirit Credit Facility which was repaid in April 2014 as a result of the sale of STI Spirit. Financial expenses relating to our other owned LR2 vessels are recorded at the corporate level. Panamax / LR1 segment The following table summarizes segment profit for our Panamax / LR1 segment. Panamax/LR1 segment In thousands of U. S. dollars Vessel revenue ....................................................................................... $ Vessel operating costs ............................................................................ Voyage expenses ................................................................................... Charterhire ............................................................................................. Depreciation ........................................................................................... General and administrative expenses ..................................................... Write-down of vessel held for sale and gain on Percentage Change Change For the year ended December 31, 2015 36,679 $ (2,144) (1,186) (21,616) — (96) 2014 57,901 $ (21,222) 8,386 (10,530) 3,640 (4,826) 5,634 (27,250) 3,194 (3,194) 313 (409) sales of vessels ................................................................................... Other income, net ................................................................................... Segment profit ....................................................................................... $ 2,019 1,397 15,053 $ (3,978) — 7,714 $ 5,997 1,397 7,339 TCE per revenue day ............................................................................. $ Owned vessel operating costs per day ................................................... Revenue days - owned vessels ............................................................... Revenue days - time chartered-in vessels .............................................. Owned vessel operating days ................................................................. Average number of owned vessels ........................................................ Average number of time chartered-in vessels ........................................ 21,804 $ 8,440 228 1,398 254 0.7 3.9 16,857 $ 8,332 1,230 1,936 1,264 3.5 5.3 4,947 (108) (1,002) (538) (1,010) (2.8) (1.4) (37)% 80 % 75 % 21 % 100 % 77 % 151 % N/A 95 % 29 % (1)% (81)% (28)% (80)% (80)% (26)% Vessel Revenue. Vessel revenue for the year ended December 31, 2015 was $36.7 million, a decrease of $21.2 million, or 37%, from the year ended December 31, 2014. The decrease in revenue was due to a decrease in vessel revenue days (owned and time chartered-in) to 1,626 days from 3,166 days for the years ended December 31, 2015 and 2014, respectively. This decrease was the result of (i) the redelivery of three time chartered-in vessels during 2015, (ii) the sales of Noemi and Senatore in March and April 2014, respectively, and (iii) the sales of Venice, STI Harmony and STI Heritage in March 2015, April 2015 and April 2015, respectively. This decrease in revenue days was offset by an overall improvement in TCE revenue per day to $21,804 per day from $16,857 per day during the years ended December 31, 2015 and 2014, respectively. This improvement was driven by an increase in worldwide demand for larger product tankers such as LR2s and LR1s as new refinery openings in the Middle East and India have resulted in longer haul voyages from those regions thus increasing overall ton-mile demand. Additionally, all of our operating segments have benefited from a decrease in bunker prices as a result of the decline in oil prices, which has had a positive impact on TCE revenue earned from the pools. 54 Vessel operating costs. Vessel operating costs for the year ended December 31, 2015 were $2.1 million, a decrease of $8.4 million, or 80%, from the year ended December 31, 2014. This decrease was due to a decrease in vessel operating days to 254 days from 1,264 days for the years ended December 31, 2015 and 2014, respectively. This was the result of the sales of Noemi and Senatore in March and April 2014, respectively and the sales of Venice, STI Harmony and STI Heritage in March 2015, April 2015 and April 2015, respectively. Voyage expenses. Voyage expenses for the year ended December 31, 2015 were $1.2 million, a decrease of $3.6 million, or 75%, from the year ended December 31, 2014. The decrease was driven by a decrease in the number of revenue days our vessels operated in the spot market. One vessel operated in the spot market for 53 days, whereas four vessels operated in the spot market for 274 days during the years ended December 31, 2015 and 2014, respectively. Charterhire. Charterhire expense for the year ended December 31, 2015 was $21.6 million, a decrease of $5.6 million, or 21%, from the year ended December 31, 2014. The decrease was the result of a decrease in the average number of time chartered-in vessels to 3.9 from 5.3 during the years ended December 31, 2015 and 2014, respectively. The time charters for FPMC P Eagle, SN Federica, and SN Azzurra all expired during the year ended December 31, 2015. These vessels were time chartered-in for all or a portion of the year ended December 31, 2014. Depreciation. Depreciation expense for the year ended December 31, 2014 was $3.2 million. We did not incur depreciation expense in this operating segment during the year ended December 31, 2015 as STI Harmony and STI Heritage were designated as held for sale and therefore ceased depreciation at December 31, 2014. These vessels were sold in April 2015. Noemi, Senatore and Venice were designated as held for sale and therefore ceased depreciation at December 31, 2013. Noemi and Senatore were sold in March and April 2014, respectively, and Venice was sold in March 2015. Write down of vessels held for sale and gain on sales of vessels. Write down of vessels held for sale and gain on sales of vessels consisted of the following: • During the year ended December 31, 2015, we recorded an aggregate gain of $2.0 million for the sales of Venice, STI Harmony and STI Heritage, which were sold in March 2015, April 2015 and April 2015, respectively. • During the year ended December 31, 2014, we recorded a $4.0 million write-down as a result of the designation of STI Heritage and STI Harmony as held for sale and the corresponding write-down to the lower of their carrying value and fair value less estimated costs to sell at that date. Other income, net. Other income, net for the year ended December 31, 2015 was $1.4 million which primarily relates to a $1.4 million gain recorded as a result of a termination fee received when the owner of one of our time chartered-in vessels canceled the contract prior to its expiration date. MR Segment We took delivery of 13 MR product tankers (including 12 under our Newbuilding Program) during 2015 and our fleet of time chartered-in MRs decreased to an average of 3.6 vessels from an average of 5.2 vessels during the years ended December 31, 2015 and 2014, respectively. The following table summarizes segment profit for our MR segment. MR segment In thousands of U.S. dollars Vessel revenue ......................................................................................................... $ Vessel operating costs .............................................................................................. Voyage expenses ..................................................................................................... Charterhire ............................................................................................................... Depreciation ............................................................................................................ General and administrative expenses ....................................................................... Write-off of vessel purchase options ....................................................................... Financial income...................................................................................................... Other expenses, net .................................................................................................. Segment profit ......................................................................................................... $ For the year ended December 31, 2014 2015 368,203 $ 151,716 $ 216,487 (47,915) (100,476) (553) (2,516) 7,094 (20,678) (28,939) (59,859) (2,014) (4,329) (731) (731) 19 27 31 (20) 36,142 $ 143,479 179,621 $ Percentage Change Change 143 % (91)% (28)% 26 % (94)% (87)% N/A 238 % 61 % 397 % (52,561 ) (1,963 ) (27,772 ) (30,920 ) (2,315 ) — 8 (51 ) TCE per revenue day ............................................................................................... $ Owned vessel operating costs per day ..................................................................... Revenue days - owned vessels ................................................................................. Revenue days - time chartered-in vessels ................................................................ Owned vessel operating days ................................................................................... Average number of owned vessels .......................................................................... Average number of time chartered-in vessels .......................................................... 21,803 $ 6,461 15,464 1,319 15,550 42.6 3.6 15,297 $ 6,580 7,906 1,884 7,957 21.8 5.2 6,506 119 7,558 (565) 7,593 20.8 (1.6) 43 % 2 % 96 % (30)% 95 % 95 % (31)% 55 Vessel revenue. Vessel revenue for the year ended December 31, 2015 was $368.2 million, an increase of $216.5 million, or 143%, from the year ended December 31, 2014. The increase in revenue was the result of an increase in the overall number of revenue days (owned and time chartered-in) to 16,783 from 9,790 in addition to an increase in TCE revenue per day to $21,803 from $15,297 during the years ended December 31, 2015 and 2014, respectively. The increase in revenue days was due to an increase in the average number of owned vessels to 42.6 from 21.8 during the years ended December 31, 2015 and 2014, respectively, offset by a decrease in the average number of time chartered-in vessels to 3.6 from 5.2 over those same periods. 13 MRs were delivered (including 12 under our Newbuilding Program) during the year ended December 31, 2015 and 22 were delivered during the year ended December 31, 2014. The vessels delivered during 2015 are as follows: Newbuilding MRs that were delivered during 2015 Vessel 1 STI Tribeca .................................... 2 STI Gramercy ................................ 3 STI Bronx ...................................... 4 STI Pontiac .................................... 5 STI Manhattan ............................... 6 STI Queens .................................... 7 STI Osceola ................................... 8 STI Notting Hill ............................. 9 STI Seneca ..................................... 10 STI Westminster ............................ 11 STI Brooklyn ................................. 12 STI Memphis ................................. 13 STI Black Hawk ............................ Delivery Date January 2015 January 2015 February 2015 March 2015 March 2015 April 2015 April 2015 May 2015 June 2015 June 2015 July 2015 August 2015 September 2015 TCE revenue per day increased to $21,803 from $15,297 per day during the years ended December 31, 2015 and 2014, respectively. This increase was the result of overall improvements in demand for our vessels worldwide. The continuing glut of crude oil supplies has led to lower worldwide oil prices and thus higher demand for refined products. As such, export oriented refineries, particularly in the U.S. Gulf Coast, have been operating at higher utilization rates which has led to increased demand for our vessels in that region and within the broader Atlantic Basin (one of the primary trading areas for MR product tankers). This has had a consequent impact on the demand for MRs throughout the world. Additionally, all of our operating segments have benefited from a decrease in bunker prices as a result of the decline in oil prices, which has had a positive impact on TCE revenue earned from our vessels operating in the Scorpio Group pools. Vessel operating costs. Vessel operating costs for the year ended December 31, 2015 were $100.5 million, an increase of $47.9 million, or 91%, from the year ended December 31, 2014. This was primarily due to an increase in operating days to 15,550 days from 7,957 days during the years ended December 31, 2015 and 2014, respectively, as we took delivery of 13 MRs throughout 2015 and 22 MRs throughout 2014. Voyage expenses. Voyage expenses for the year ended December 31, 2015 were $2.5 million, an increase of $0.6 million or 28%, from the year ended December 31, 2014. Voyage expenses for the MR segment primarily consist of the costs incurred on vessels delivered under our Newbuilding Program during each year as these vessels commenced short term time charters (up to 120 days) upon delivery from the shipyard and prior to their entry into the Scorpio MR Pool. These costs primarily consisted of bunker costs (to the first port of loading), tank cleaning costs, and other miscellaneous costs. We had 1,652 and 1,364 days of vessels on short-term time charters during the years ended December 31, 2015 and 2014, respectively. Additionally, vessels on long-term time charter also incur voyage expenses as a result of commercial management fees paid to SCM, a related party. These commissions were $0.7 million from $0.3 million during the years ended December 31, 2015 and 2014, respectively. Charterhire. Charterhire expense for the year ended December 31, 2015 was $20.7 million, a decrease of $7.1 million, or 26%, from the year ended December 31, 2014. The decrease was the result of a decrease in the average number of time chartered-in vessels to 3.6 from 5.2 during the years ended December 31, 2015 and 2014, respectively. The time charters for USMA and Nave Orion expired during the year ended December 31, 2015. The time charters for Freja Lupus, STX Ace 6, Ugale and Gan-Triumph expired during the year ended December 31, 2014. 56 Depreciation. Depreciation expense for the year ended December 31, 2015 was $59.9 million, an increase of $28.9 million, or 94%, from the year ended December 31, 2014. The increase was the result of an increase in the average number of owned MRs to 42.6 from 21.8 for the years ended December 31, 2015 and 2014, respectively. We took delivery of 13 and 22 MRs during the years ended December 31, 2015 and 2014, respectively. General and administrative expenses. General and administrative expenses for the year ended December 31, 2015 were $4.3 million, an increase of $2.0 million, or 87%, from the year ended December 31, 2014. General and administrative expenses for the MR segment primarily consist of administrative fees to SSH, which increased as a result of the increase in the average number of owned MR vessels to 42.6 from 21.8 for the year ended December 31, 2015 and 2014, respectively. Write-off of vessel purchase options. Write-off of vessel purchase options of $0.7 million during the year ended December 31, 2015 was the result of the write-off of deposits made for options to construct MR product tankers that expired unexercised in December 2015. Handymax Segment We took delivery of two Handymax ice class 1A product tankers under our Newbuilding Program during 2015 and our fleet of time chartered-in Handymax product tankers decreased to an average of 5.4 vessels from an average of 7.9 vessels during the years ended December 31, 2015 and 2014, respectively. The following table summarizes segment profit for our Handymax segment. Handymax segment In thousands of U.S. dollars For the year ended December 31, 2015 2014 Percentage Change Change Vessel revenue ......................................................................................... $ 142,429 $ 65,766 $ 76,663 (24,352) Vessel operating costs .............................................................................. 135 Voyage expenses ..................................................................................... 11,635 Charterhire ............................................................................................... (12,936) Depreciation ............................................................................................. (940) General and administrative expenses ....................................................... (2,054) Loss from the sale of vessel ..................................................................... Financial income ...................................................................................... 5 Segment profit ......................................................................................... $ 9,919 $ 48,156 (10,902) (671) (38,390) (5,436) (450) — 2 (35,254) (536) (26,755) (18,372) (1,390) (2,054) 58,075 $ 7 TCE per revenue day ............................................................................... $ Owned vessel operating costs per day ..................................................... Revenue days - owned vessels ................................................................. Revenue days - time chartered-in vessels ................................................ Owned vessel operating days ................................................................... Average number of owned vessels .......................................................... Average number of time chartered-in vessels .......................................... 19,686 $ 14,528 $ 6,473 5,274 1,959 5,400 14.8 5.4 6,704 1,593 2,887 1,620 4.4 7.9 5,158 231 3,681 (928) 3,780 10.4 (2.5) 117 % (223)% 20 % 30 % (238)% (209)% N/A 250 % 485 % 36 % 3 % 231 % (32)% 233 % 236 % (32)% Vessel revenue. Vessel revenue for the year ended December 31, 2015 was $142.4 million, an increase of $76.7 million, or 117%, from the year ended December 31, 2014. The increase is driven by an increase in the number of revenue days (owned and time chartered-in) to 7,233 from 4,480 days during the years ended December 31, 2015 and 2014, respectively. Two Handymax ice class 1A product tankers were delivered during the year ended December 31, 2015 and 12 were delivered during the year ended December 31, 2014. The vessels delivered during 2015 are as follows: Newbuilding Handymax ice class 1A product tankers delivered during 2015 Vessel 1 STI Hammersmith ......................... 2 STI Rotherhithe ............................. Delivery Date January 2015 January 2015 TCE revenue per day increased to $19,686 from $14,528 per day during the years ended December 31, 2015 and 2014, respectively. This increase was the result of overall improvements in demand for our vessels across most trading routes. The continuing glut of crude oil supplies has led to lower oil prices and thus higher demand for refined products worldwide. This dynamic has had a resultant, positive impact across all of our operating segments. Additionally, all of our operating segments have benefited from a decrease in bunker prices due to the decline in oil prices, which has had a positive impact on TCE revenue earned from our vessels operating in the Scorpio Group pools. 57 Vessel operating costs. Vessel operating costs for the year ended December 31, 2015 were $35.3 million, an increase of $24.4 million, or 223%, from the year ended December 31, 2014. This increase was primarily due to an increase in vessel operating days as owned vessel operating days increased to 5,400 from 1,620 days during the years ended December 31, 2015 and 2014, respectively. This increase was due to the delivery of two Handymax ice class 1A product tankers during the year ended December 31, 2015 and 12 during the year ended December 31, 2014 (which operated for the entire year during 2015). Voyage expenses. Voyage expenses for the year ended December 31, 2015 were $0.5 million, a decrease of $0.1 million, or 20%, from the year ended December 31, 2014. The decrease was driven by the vessels delivered under our Newbuilding Program, which were employed on short-term time charters (up to 120 days) that commenced upon delivery from the shipyard for a total of 262 and 812 days during the years ended December 31, 2015 and 2014, respectively. While these time charters are agreed to at fixed TCE rates, voyage costs are incurred for bunker costs (to the first load port), tank cleaning costs and other miscellaneous costs incurred prior to their entrance into the Scorpio Handymax Pool. Charterhire. Charterhire expense for the year ended December 31, 2015 was $26.8 million, a decrease of $11.6 million, or 30%, from the year ended December 31, 2014. The decrease was the result of a decrease in the average number of time chartered-in vessels to 5.4 from 7.9 during the years ended December 31, 2015 and 2014, respectively. This is the result of the time charters for Histria Azure, Histria Perla, Histria Coral and Jinan expiring during 2015 and the time charters for Iver Progress and Freja Polaris expiring during 2014. Depreciation. Depreciation expense for the year ended December 31, 2015 was $18.4 million, an increase of $12.9 million, or 238%, from the year ended December 31, 2014. The increase was driven by the deliveries of the two and 12 ice class-1A Handymax tankers under our Newbuilding Program during the years ended December 31, 2015 and 2014, respectively. General and administrative expenses. General and administrative expenses for the year ended December 31, 2015 were $1.4 million, an increase of $0.9 million, or 209% from the year ended December 31, 2014. General and administrative expenses for the Handymax segment primarily consist of administrative fees to SSH, which increased as a result of the increase in the average number of owned Handymax vessels to 14.8 from 4.4 for the years ended December 31, 2015 and 2014, respectively. Loss from sale of vessel. Loss from sale of vessel of $2.1 million for the year ended December 31, 2015 was due to the loss we incurred on the sale of STI Highlander in October 2015. Results of Operations for the year ended December 31, 2014 compared to the year ended December 31, 2013 For the year ended December 31, Percentage Change Change 2014 2013 (4,846) (78,823) (7,533) In thousands of U.S. dollars Vessel revenue ............................................................................................. $ 342,807 $ 207,580 $ 135,227 (40,204) (38,619) Vessel operating costs .................................................................................. Voyage expenses ......................................................................................... (2,687) (139,168) (115,543) (23,625) Charterhire ................................................................................................... (23,595) (19,022) Depreciation ................................................................................................. (25,788) (22,341) General and administrative expenses ........................................................... (21,187) 17,209 Write down of vessels held for sale and loss from sales of vessels ............. (41,375) 41,375 Gain on sale of VLGCs ................................................................................ 51,419 — Gain on sale of VLCCs ................................................................................ 10,924 — Gain on sale of Dorian shares ...................................................................... (13,895) — Re-measurement of investment in Dorian ................................................... (2,705) (18,065) Financial expenses ....................................................................................... 14 Realized gain on derivative financial instruments ....................................... (303) Unrealized gain on derivative financial instruments .................................... (944) Financial income .......................................................................................... Share of profit from associate ...................................................................... 1,104 55 Other expenses, net ...................................................................................... Net income ................................................................................................... $ 52,091 $ 17,015 $ 35,076 (42,617) (48,129) (3,978) — 51,419 10,924 (13,895) (20,770) 17 264 203 1,473 (103) 3 567 1,147 369 (158) 65 % (96)% (55)% (20)% (81)% (87)% 81 % (100)% N/A N/A N/A (668)% 467 % (53)% (82)% 299 % 35 % 206 % 58 Net income. Net income for the year ended December 31, 2014 was $52.1 million, an increase of $35.1 million, or 206%, from net income of $17.0 million for the year ended December 31, 2013. The differences between the two periods are discussed below. Vessel revenue. Vessel revenue for the year ended December 31, 2014 was $342.8 million, an increase of $135.2 million, or 65%, from vessel revenue of $207.6 million for the year ended December 31, 2013. Overall revenue increases were driven by growth in our fleet of both owned and time chartered-in vessels to an average of 31.6 owned and 26.3 time chartered-in vessels during the year ended December 31, 2014 from an average of 15.9 owned and 22.9 time chartered-in vessels during the year ended December 31, 2013. Additionally, the increase in vessel revenue is also driven by an increase in overall TCE revenue per day to $15,935 per day from $14,369 per day during the years ended December 31, 2014 and 2013, respectively. The following is a summary of our consolidated revenue by revenue type, in addition to TCE revenue per day and total revenue days. In thousands of U.S. dollars For the year ended December 31, Percentage 2014 2013 Change Change Pool revenue .......................................................................................... $ 280,857 $ 190,017 $ 90,840 13,538 Time charter-out revenue ....................................................................... 30,549 Voyage revenue (spot market) ............................................................... 300 Other revenue ........................................................................................ 135,227 Gross revenue ........................................................................................ (2,687) Voyage expenses ................................................................................... TCE revenue (1) ...................................................................................... 132,540 13,538 48,112 300 342,807 — 17,563 — 207,580 335,274 202,734 (7,533) (4,846) TCE Revenue per day: (1) Pool ........................................................................................................ $ Time charter-out .................................................................................... Voyage ................................................................................................... Consolidated TCE revenue per day ....................................................... 15,837 $ 15,194 16,798 15,935 14,246 $ — 16,499 14,369 1,591 15,194 299 1,566 Revenue days: Pool - owned vessels .............................................................................. Pool - time chartered-in vessels ............................................................. Time-charter out - owned vessels .......................................................... Voyage - owned vessels ......................................................................... Voyage - time chartered-in vessels ........................................................ Total revenue days ................................................................................. 8,183 9,551 852 2,401 50 21,037 5,323 8,015 — 445 326 14,109 2,860 1,536 852 1,956 (276) 6,928 48 % N/A 174 % N/A 65 % 55 % 65 % 11 % N/A 2 % 11 % 54 % 19 % N/A 440 % (85)% 49 % (1) We report TCE revenues, a non-IFRS measure, because (i) we believe it provides additional meaningful information in conjunction with voyage revenues and voyage expenses, the most directly comparable IFRS measure, (ii) it assists our management in making decisions regarding the deployment and use of our vessels and in evaluating their financial performance, (iii) it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company’s performance irrespective of changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods, and (iv) we believe that it presents useful information to investors. Pool revenue. The increase in pool revenue was primarily due to the growth of our fleet as seven LR2s, 11 MRs and seven Handymax tankers that were delivered under our Newbuilding Program entered the Scorpio Group Pools during 2014. Additionally, our fleet of time chartered-in vessels increased to an average of 26.3 from 22.9 vessels during the years ended December 31, 2014 and 2013, respectively, resulting in an increase in pool revenue days for time chartered-in vessels of 1,536 days. Pool TCE revenue per day also improved to $15,837 per day from $14,246 per day over this same period as pool results improved across all operating segments. Time charter-out revenue. We took delivery of four MR product tankers under our Newbuilding Program during the year ended December 31, 2014 that commenced long-term time charters (with initial terms of one year or greater) upon delivery from the shipyard. STI Texas City began a two year time charter in March 2014, STI Meraux and STI San Antonio each began one year time charterers in May 2014 and STI Benicia began a one year time charter in September 2014. Each time charter has a 50% profit sharing provision whereby we split all of the vessels profits above the daily base rate with the charterer. 59 Voyage revenue (spot market). The increase in voyage (spot) revenue was primarily driven by vessels delivered under our Newbuilding Program throughout 2014. This revenue can be broken down as follows: • Short term time charters: We consider short-term time charters (less than one year) as spot market voyages. Vessels delivered under our Newbuilding Program were employed on short-term time charters (up to 120 days) for a total of 2,177 days during the year ended December 31, 2014. Vessels delivered under our Newbuilding Program during 2013 were employed on similar short-term time charters for a total of 445 days during the year ended December 31, 2013. • Spot market voyages: Noemi, Senatore, Venice and SN Azzurra operated in the spot market for a total of 274 days during the year ended December 31, 2014. Gan-Trust, SN Federica, King Douglas, and Nave Orion operated in the spot voyage for 321 days during the year ended December 31, 2013. Vessel operating costs. Vessel operating costs for the year ended December 31, 2014 were $78.8 million, an increase of $38.6 million, or 96%, from $40.2 million for the year ended December 31, 2013. Vessel operating days increased to 11,548 days from 5,820 days and vessel operating costs per day remained relatively consistent at $6,802 per day compared to $6,781 per day for the years ended December 31, 2014 and 2013, respectively. The increase in operating days was principally the result of the deliveries of 41 vessels under our Newbuilding Program throughout 2014. Voyage expenses. Voyage expenses for the year ended December 31, 2014 were $7.5 million, an increase of $2.7 million, or 55%, from $4.8 million during the year ended December 31, 2013. This increase was due to an increase in the number of days vessels operated in the spot market which increased to 2,451 days from 771 days during the years ended December 31, 2014 and 2013, respectively. The spot market voyages for Noemi, Senatore, Venice and SN Azzurra incurred voyage costs of $4.8 million during the year ended December 31, 2014 whereas the spot market voyages for Gan-Trust, SN Federica, King Douglas, and Nave Orion incurred voyage costs of $4.0 million during the year ended December 31, 2013. Furthermore, vessels delivered under our Newbuilding Program commenced short-term time charters (less than 120 days) upon their deliveries from the shipyard for a total of 2,177 days in 2014. Vessels delivered in 2013 were employed on similar short-term time charters for a total of 445 days. While these time charters are agreed to at fixed TCE rates, they incurred voyage costs prior to their entry into the Scorpio Group Pools for items such as bunker expenses (to their first port of loading) and tank cleaning costs. Charterhire. Charterhire expense for the year ended December 31, 2014 was $139.2 million, an increase of $23.6 million, or 20%, from $115.5 million during the year ended December 31, 2013. This increase was the result of an increase in the average number of time chartered-in vessels to 26.3 from 22.9 during the years ended December 31, 2014 and 2013, respectively. Depreciation. Depreciation expense for the year ended December 31, 2014 was $42.6 million, an increase of $19.0 million, or 81%, from $23.6 million during the year ended December 31, 2013. The increase was the result of an increase in the average number of owned vessels to 31.6 from 15.9 for the years ended December 31, 2014 and 2013, respectively. General and administrative expenses. General and administrative expenses for the year ended December 31, 2014 were $48.1 million, an increase of $22.3 million, or 87%, from $25.8 million during the year ended December 31, 2013. The change was driven by a $16.6 million increase in restricted stock amortization (non-cash) in addition to an overall increase in other general and administrative expenses due to the significant growth of the Company. Write down of vessels held for sale and loss from sales of vessels. Write down of vessels held for sale and loss from sales of vessels for the year ended December 31, 2014 was $4.0 million, a decrease of $17.2 million, or 81%, from $21.2 million during the year ended December 31, 2013. Write-down of vessels held for sale for the year ended December 31, 2014 relates to the designation of STI Heritage and STI Harmony as held for sale and the corresponding write-down to the lower of their carrying value and fair value less estimated costs to sell at that date. Write-down of vessels held for sale for the year December 31, 2013 relates to the designation of Noemi, Senatore, Venice and STI Spirit as held for sale and the corresponding write-down to the lower of their carrying value and fair value less estimated costs to sell at that date. Noemi was sold in March 2014, Senatore and STI Spirit were sold in April 2014, Venice was sold in March 2015 and STI Harmony and STI Heritage were sold in April 2015. 60 Gain on sale of VLCCs. Gain on sale of VLCCs of $51.4 million during the year ended December 31, 2014 was the result of the sale of our seven VLCCs under construction in March 2014. As a result of the sale, we received net proceeds in cash of $141.7 million and the book value of these assets at the time of sale (primarily consisting of installment payments made to date) was $90.3 million. Gain on sale of Dorian shares. Gain on sale of Dorian shares of $10.9 million during the year ended December 31, 2014 relates to our acquisition of 7,500,000 of our common shares from an existing shareholder in exchange for 3,422,665 common shares of Dorian in a privately negotiated transaction. As a result of the disposal of the Dorian shares, we recognized a gain of $10.9 million. Re-measurement of investment in Dorian. Re-measurement of investment in Dorian of $13.9 million during the year ended December 31, 2014 relates to a change in the accounting method for our investment in Dorian from the equity method to the available for sale method. On October 29, 2014, Robert Bugbee, our President, resigned from Dorian’s board of directors. Accordingly, we determined that we no longer had significant influence over Dorian’s financial and operating decisions as of that date. As such, we remeasured our investment to its fair market value on October 29, 2014, which resulted in a write down of $13.9 million. Financial expenses. Financial expenses for the year ended December 31, 2014 were $20.8 million, an increase of $18.1 million, or 668%, from $2.7 million during the year ended December 31, 2013. The change was primarily due to an increase in our average debt outstanding which increased to $783.9 million from $176.7 million for the years ended December 31, 2014 and December 31, 2013, respectively. Financial expenses for the year ended December 31, 2014 consisted of interest expense ($15.9 million), amortization of loan fees ($4.8 million) and other financial expenses ($0.05 million). Financial expenses for the year ended December 31, 2013 consisted of interest expense ($1.0 million), commitment fees on the undrawn portions of our credit facilities ($1.4 million), and amortization of loan fees ($0.3 million). Share of income from associate. Share of income from associate for the year ended December 31, 2014 was $1.5 million, an increase of $1.1 million, or 299%, from $0.4 million during the year ended December 31, 2013. Share of income from associate represents our share of Dorian’s income from November 26, 2013 (the date that our initial investment closed) through October 29, 2014 (the date we lost significant influence of Dorian’s financial and operating decisions). Results of operations — segment analysis During the years ended December 31, 2014 and 2013 we owned or chartered-in vessels spanning four different vessel classes, Handymax, MR, Panamax/LR1, and Aframax/LR2, all of which earn revenues in the seaborne transportation of refined petroleum products in the international shipping markets. Each vessel within its respective class qualifies as an operating segment under IFRS. However, each vessel also exhibits similar long-term financial performance and similar economic characteristics to the other vessels within the respective vessel class, thereby meeting the aggregation criteria in IFRS. We have therefore chosen to present our segment information by vessel class using the aggregated information from the individual vessels. Segment results are evaluated based on reported profit or loss from each segment. The accounting policies applied to the reportable segments are the same as those used in the preparation of our consolidated financial statements. LR2 Segment We took delivery of seven LR2 tankers under our Newbuilding Program during 2014. Additionally, our time chartered-in fleet of LR2s increased to an average of 7.9 vessels from 5.1 vessels during the years ended December 31, 2014 and 2013, respectively. 61 The following table summarizes segment profit or loss for our LR2 segment. LR2 segment In thousands of U.S. dollars For the year ended December 31, Percentage 2014 2013 Change Change Vessel revenue ......................................................................................... $ 67,124 $ 28,204 $ 38,920 (1,619) Vessel operating costs .............................................................................. (73) Voyage expenses ..................................................................................... (16,415) Charterhire ............................................................................................... (1,317) Depreciation ............................................................................................. (83) General and administrative expenses ....................................................... 6,185 Write down of vessel held for sale ........................................................... 338 Financial expenses ................................................................................... 1 Financial income ...................................................................................... 10 Other expenses, net .................................................................................. Segment profit / (loss) ............................................................................. $ 12,653 $ (13,294) $ 25,947 (4,830) (73) (45,756) (3,067) (237) — (509) 1 — (29,341) (1,750) (154) (6,185) (847) — (10) (3,211) — TCE per revenue day ............................................................................... $ 18,621 $ 12,718 $ Owned vessel operating costs per day ..................................................... Revenue days - owned vessels ................................................................. Revenue days - time chartered-in vessels ................................................ Owned vessel operating days ................................................................... Average number of owned vessels .......................................................... Average number of time chartered-in vessels .......................................... 6,789 707 2,894 707 1.9 7.9 8,203 345 1,873 365 1.0 5.1 5,903 1,414 362 1,021 342 0.9 2.8 138 % (50)% N/A (56)% (75)% (54)% 100 % 40 % N/A 100 % 195 % 46 % 17 % 105 % 55 % 94 % 90 % 55 % Vessel revenue. Vessel revenue for the year ended December 31, 2014 was $67.1 million, an increase of $38.9 million, or 138%, from the year ended December 31, 2013. The increase was due to an increase in TCE revenue per day and revenue days as a result of the growth in the LR2 fleet. We took delivery of the following LR2s under our Newbuilding Program during 2014: Newbuilding LR2s that were delivered throughout 2014: Vessel STI Elysees .................................... STI Madison .................................. STI Park ......................................... STI Orchard ................................... STI Sloane ..................................... STI Condotti .................................. STI Broadway ................................ 1 2 3 4 5 6 7 Delivery Date July 2014 September 2014 September 2014 October 2014 November 2014 November 2014 November 2014 The increase in TCE revenue per day to $18,621 from $12,718 per day during the years ended December 31, 2014 and 2013, respectively, was driven by an overall improvement in the LR2 spot market in the second half of 2014. This was due to an increase in overall ton mile demand for larger vessels, particularly LR1s and LR2s, as new refinery start-ups in the Middle East and India led to increased exports out of those regions. Vessel operating costs. Vessel operating costs were $4.8 million for the year ended December 31, 2014, an increase of $1.6 million, or 50%, from the year ended December 31, 2013. The increase was due to an additional 342 operating days offset by an improvement in operating costs per day. During the year ended December 31, 2014, the seven vessels delivered under our Newbuilding Program operated for an aggregate of 600 days at $6,501 per day and STI Spirit operated for 106 days at $8,410 per day. In 2013, STI Spirit was the only owned vessel in the LR2 segment. Charterhire. Charterhire expense for the year ended December 31, 2014 was $45.8 million, an increase of $16.4 million, or 56%, from the year ended December 31, 2013. The change was due to an increase in the average number of time chartered-in vessels to 7.9 from 5.1 during the years ended December 31, 2014 and 2013, respectively. During the year ended December 31, 2013, Khawr Aladid, FPMC Hero, FPMC Ideal, Fair Seas, Pink Stars, Orange Stars, Densa Alligator, Four Sky and Southport were time chartered-in for all or a portion of the period. In addition to those vessels, Swarna Jayanti was time chartered-in for a portion of the year ended December 31, 2014. 62 Depreciation. Depreciation expense for the year ended December 31, 2014 was $3.1 million, an increase of $1.3 million, or 75%, from year ended December 31, 2013. The increase was driven by the delivery of seven vessels under our Newbuilding Program during 2014. STI Spirit was our only owned LR2 during 2013, which ceased being depreciated and was written down to the lower of its carrying amount and fair value less estimated costs to sell at December 31, 2013. STI Spirit was sold in April 2014. Write down of vessels held for sale. Write down of vessels held for sale for the year ended December 31, 2013 was $6.2 million. The write down relates to the re-measurement of STI Spirit at the lower of its carrying value and fair value less estimated costs to sell as the vessel was designated as held for sale at December 31, 2013. This vessel was sold in April 2014 for gross proceeds of $30.2 million. There were no such write-downs in 2014 for our LR2 operating segment. Financial expenses. Financial expenses for the year ended December 31, 2014 were $0.5 million, a decrease of $0.3 million, or 40%, from the year ended December 31, 2013. Financial expenses for the LR2 segment relate to interest expense on our STI Spirit Credit Facility. We repaid the entire outstanding amount of $21.4 million under this facility in April 2014 as a result of the sale of STI Spirit. Financial expenses relating to our other owned LR2s are recorded at a corporate level. Panamax / LR1 segment The following table summarizes segment profit or loss for our Panamax / LR1 segment. Panamax/LR1 segment In thousands of U.S. dollars For the year ended December 31, Percentage 2014 2013 Change Change Vessel revenue .......................................................................................... $ 57,901 $ 41,683 $ 16,218 3,746 Vessel operating costs ............................................................................... (968) Voyage expenses ...................................................................................... (12,887) Charterhire ................................................................................................ 4,081 Depreciation .............................................................................................. 127 General and administrative expenses ........................................................ 11,024 Write down of vessels held for sale .......................................................... (3) 3 Realized gain on derivative financial instruments .................................... (186) 186 Unrealized gain on derivative financial instruments ................................. Segment profit / (loss) .............................................................................. $ 7,714 $ (13,438) $ 21,152 (10,530) (4,826) (27,250) (3,194) (409) (3,978) — — (14,276) (3,858) (14,363) (7,275) (536) (15,002) TCE per revenue day ................................................................................ $ 16,857 $ 12,599 $ Owned vessel operating costs per day ...................................................... Revenue days - owned vessels .................................................................. Revenue days - time chartered-in vessels ................................................. Owned vessel operating days .................................................................... Average number of owned vessels ........................................................... Average number of time chartered-in vessels ........................................... 8,332 1,230 1,936 1,264 3.5 5.3 7,756 1,825 1,180 1,825 5.0 3.2 4,258 (576) (595) 756 (561) (1.5) 2.1 39 % 26 % (25)% (90)% 56 % 24 % 73 % (100)% (100)% 157 % 34 % (7)% (33)% 64 % (31)% (30)% 66 % Vessel Revenue. Vessel revenue for the year ended December 31, 2014 was $57.9 million, an increase of $16.2 million, or 39%, from the year ended December 31, 2013. The increase in revenue was due to an overall improvement in TCE revenue per day to $16,857 per day from $12,599 per day during the years ended December 31, 2014 and 2013, respectively. The LR1 market improved during 2014 as a result of a strong trade in dirty products (such as fuel oil) during the first quarter of 2014, in addition to an increase in exports of refined products out of the Middle East and India during the second half of 2014 as a result of new refinery start-ups. The increase was also driven by growth in our fleet of time chartered-in vessels, which increased to an average of 5.3 from 3.2 vessels for the years ended December 31, 2014 and 2013, respectively. Vessel operating costs. Vessel operating costs for the year ended December 31, 2014 were $10.5 million, a decrease of $3.7 million, or 26%, from the year ended December 31, 2013. This change was due to a decrease in vessel operating days to 1,264 days from 1,825 days, offset by an increase in vessel operating costs per day to $8,332 from $7,756 per day for the years ended December 31, 2014 and 2013, respectively. The decrease in operating days was the result of the sales of Noemi and Senatore in March and April 2014, respectively. Vessel operating costs per day increased as a result of higher crew costs on Noemi and Senatore prior to their sales, in addition to an increase in overall operating costs for Venice, which was sold in March 2015. 63 Voyage expenses. Voyage expenses for the year ended December 31, 2014 were $4.8 million, an increase of $1.0 million, or 25%, from the year ended December 31, 2013. The increase was due to Noemi, Senatore, Venice and SN Azzurra, which operated in the spot market for 274 days during the year ended December 31, 2014, whereas only SN Federica and King Douglas operated in the spot market for 187 days during the year ended December 31, 2013. Charterhire. Charterhire expense for the year ended December 31, 2014 was $27.3 million, an increase of $12.9 million, or 90%, from the year ended December 31, 2013. The change was the result of an increase in the average number of time chartered-in vessels to 5.3 from 3.2 during the years ended December 31, 2014 and 2013, respectively. FPMC P Eagle, SN Federica, Hellespont Promise, King Douglas, and SN Azzurra were time chartered-in for all or a portion of the year ended December 31, 2013. In addition to these five vessels, Hellespont Progress was time chartered-in for a portion of the year ended December 31, 2014. Depreciation. Depreciation expense for the year ended December 31, 2014 was $3.2 million, a decrease of $4.1 million, or 56%, from the year ended December 31, 2013. The decrease was due to Noemi, Senatore and Venice, which ceased being depreciated and were written down to their estimated disposal values at December 31, 2013, the date which they were designated as held for sale. Noemi and Senatore were sold in March and April 2014, respectively. Venice was sold in March 2015. Write down of vessels held for sale. Write down of vessels held for sale for the year ended December 31, 2014 was $4.0 million, a decrease of $11.0 million, or 73%, from the year ended December 31, 2013. At December 31, 2013, Noemi, Senatore and Venice were designated as held for sale and were written down by $15.0 million to the lower of their carrying value and fair value less estimated costs to sell. Noemi and Senatore were sold in March and April 2014, respectively. STI Heritage and STI Harmony were designated as held for sale in December 2014 and were written down by $3.9 million to the lower of their carrying value and fair value less estimated costs to sell. Additionally, Venice was written down by an additional $0.1 million at December 31, 2014. Venice was sold in March 2015 for $13.0 million and STI Harmony and STI Heritage were sold in April 2015, respectively for an aggregate selling price of $61.5 million. MR Segment We took delivery of 22 MR tankers under our Newbuilding Program during 2014 and our fleet of time chartered-in MRs decreased to an average of 5.2 vessels from an average of 7.8 vessels during the years ended December 31, 2014 and 2013, respectively. The following table summarizes segment profit for our MR segment. MR segment In thousands of U.S. dollars For the year ended December 31, Percentage 2014 2013 Change Change Vessel revenue .......................................................................................... $ 151,716 $ 101,488 $ 50,228 (32,492) Vessel operating costs ............................................................................... (986) Voyage expenses ...................................................................................... 12,981 Charterhire ................................................................................................ (17,642) Depreciation .............................................................................................. (1,285) General and administrative expenses ........................................................ 4 Financial income ....................................................................................... Other expenses, net ................................................................................... (30) Segment profit .......................................................................................... $ 36,142 $ 25,364 $ 10,778 (52,561) (1,963) (27,772) (30,920) (2,315) (20,069) (977) (40,753) (13,278) (1,030) 4 (21) 8 (51) TCE per revenue day ................................................................................ $ 15,297 $ 16,546 $ Owned vessel operating costs per day ...................................................... Revenue days - owned vessels .................................................................. Revenue days - time chartered-in vessels ................................................. Owned vessel operating days .................................................................... Average number of owned vessels ........................................................... Average number of time chartered-in vessels ........................................... 6,580 7,906 1,884 7,957 21.8 5.2 6,069 3,233 2,839 3,265 8.9 7.8 (1,249) (511) 4,673 (955) 4,692 12.9 (2.6) 49 % (162)% (101)% 32 % (133)% (125)% 100 % (143)% 42% (8)% (8)% 145 % (34)% 144 % 145 % (33)% Vessel revenue. Vessel revenue for the year ended December 31, 2014 was $151.7 million, an increase of $50.2 million, or 49%, from the year ended December 31, 2013. The change in revenue was the result of an increase in the overall number of revenue days to 9,790 from 6,072 offset by a decrease in TCE revenue per day to $15,297 from $16,546 during the years ended December 31, 2014 and 2013, respectively. 64 The increase in revenue days was due to an increase in the average number of owned vessels to 21.8 from 8.9 during the years ended December 31, 2014 and 2013, respectively, offset by a decrease in the average number of time chartered-in vessels to 5.2 from 7.8 over those same periods. 22 MRs were delivered under our Newbuilding Program during the year ended December 31, 2014 and seven were delivered during the year ended December 31, 2013, as depicted in the table below. Newbuilding MRs that were delivered throughout 2014 Vessel STI Duchessa ................................ STI Opera ...................................... STI Texas City .............................. STI Meraux ................................... STI Chelsea ................................... STI San Antonio ............................ STI Lexington ............................... STI Venere .................................... STI Virtus ...................................... STI Powai ...................................... STI Aqua ....................................... STI Dama ...................................... STI Olivia ...................................... STI Mythos ................................... STI Regina .................................... STI Benicia ................................... STI St. Charles .............................. STI Mayfair ................................... STI Yorkville ................................ STI Milwaukee .............................. STI Battery .................................... STI Soho ....................................... 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Newbuilding MRs that were delivered throughout 2013 Vessel STI Sapphire ................................... STI Emerald ................................... STI Beryl ........................................ STI Le Rocher ................................ STI Larvotto ................................... STI Fontvieille ................................ STI Ville ......................................... 1 2 3 4 5 6 7 Delivery Date January 2014 January 2014 March 2014 April 2014 May 2014 May 2014 May 2014 June 2014 June 2014 July 2014 July 2014 July 2014 August 2014 August 2014 September 2014 September 2014 September 2014 October 2014 October 2014 November 2014 December 2014 December 2014 Delivery Date January 2013 March 2013 April 2013 July 2013 July 2013 August 2013 September 2013 The increase in revenue days was offset by a decrease in TCE revenue per day to $15,297 from $16,546 per day during the years ended December 31, 2014 and 2013, respectively. Elongated maintenance schedules and unscheduled outages in U.S. Gulf Coast refineries pressured charter rates for MRs trading in that region in the first half of 2014, which had a consequent effect on the overall spot market. The second half of 2014 improved as a result of increased exports of refined products out of U.S. Gulf Coast refineries, which had a consequent impact on overall spot rates, particularly in the Atlantic Basin. Vessel operating costs. Vessel operating costs for the year ended December 31, 2014 were $52.6 million, an increase of $32.5 million, or 162%, from the year ended December 31, 2013. This was due to an increase in operating days and operating costs per day. The number of operating days increased to 7,957 days from 3,265 days during the years ended December 31, 2014 and 2013, respectively, as we took delivery of 22 newbuilding MRs throughout 2014 and seven during 2013. In addition, operating costs per day increased by $511 per day as a result of increases in routine repairs and maintenance expenses for the initial vessels delivered under our Newbuilding Program in 2012 and early 2013. Voyage expenses. Voyage expenses for the year ended December 31, 2014 were $2.0 million, an increase of $1.0 million or 101%, from the year ended December 31, 2013. Voyage expenses for the MR segment consist of the costs incurred on vessels delivered under our Newbuilding Program during each year as these vessels commenced short-term time charters 65 (up to 120 days) upon delivery from the shipyard and prior to their entry into the Scorpio MR Pool. These costs relate to costs incurred prior to their entries into the pool and primarily consisted of bunker costs (to the first port of loading), tank cleaning costs, and other miscellaneous costs. We had 1,364 days and 583 days of vessels on short-term time charter during the years ended December 31, 2014 and 2013, respectively. Charterhire. Charterhire expense for the year ended December 31, 2014 was $27.8 million, a decrease of $13.0 million, or 32%, from the year ended December 31, 2013. The decrease was the result of a decrease in the average number of time chartered-in vessels to 5.2 from 7.8 during the years ended December 31, 2014 and 2013, respectively. The time charters for Endeavour, Pacific Duchess and Valle Bianca expired during the year ended December 31, 2013, while the time charters for Freja Lupus, STX Ace 6, Ugale and Gan-Triumph expired during the year ended December 31, 2014. Depreciation. Depreciation expense for the year ended December 31, 2014 was $30.9 million, an increase of $17.6 million, or 133%, from the year ended December 31, 2013. The increase was the result of an increase in the average number of owned MRs to 21.8 from 8.9 for the years ended December 31, 2014 and 2013, respectively. We took delivery of 22 and seven MRs under our Newbuilding Program during the years ended December 31, 2014 and 2013, respectively. General and administrative expenses. General and administrative expenses for the year ended December 31, 2014 were $2.3 million, an increase of $1.3 million, or 125%, from the year ended December 31, 2013. General and administrative expenses for the MR segment primarily consist of administrative fees to SSH, which increased as a result of the increase in the average number of owned MR vessels to 21.8 from 8.9 for the year ended December 31, 2014 and 2013, respectively. Handymax Segment We took delivery of 12 Handymax ice class 1A product tankers under our Newbuilding Program during 2014 and our fleet of time chartered-in Handymaxes increased to an average of 7.9 vessels from an average of 6.7 vessels during the years ended December 31, 2014 and 2013, respectively. The following table summarizes segment profit for our Handymax segment. For the year ended December 31, Percentage Change Change Handymax segment In thousands of U.S. dollars Vessel revenue ...................................................................................... $ Vessel operating costs ........................................................................... Voyage expenses .................................................................................. Charterhire ............................................................................................ Depreciation .......................................................................................... General and administrative expenses .................................................... Financial income ................................................................................... Segment profit ...................................................................................... $ 2014 65,766 $ (10,902) (671) (38,390) (5,436) (450) 2 9,919 $ 2013 36,205 $ 29,561 (8,254) (2,648) (660) (11) (7,304) (31,086) (4,144) (1,292) (332) (118) 2 — 1,050 $ 8,869 TCE per revenue day ............................................................................ $ Owned vessel operating costs per day .................................................. Revenue days - owned vessels .............................................................. Revenue days - time chartered-in vessels ............................................. Owned vessel operating days ................................................................ Average number of owned vessels ....................................................... Average number of time chartered-in vessels ....................................... 14,528 $ 6,704 1,593 2,887 1,620 4.4 7.9 12,862 $ 1,666 148 6,852 1,228 365 437 2,450 1,255 365 3.4 1.0 1.2 6.7 Vessel revenue. Vessel revenue for the year ended December 31, 2014 was $65.8 million, an increase of $29.6 million, or 82%, from the year ended December 31, 2013. The increase is driven by an increase in the number of revenue days to 4,480 from 2,815 days during the years ended December 31, 2014 and 2013, respectively as we took delivery of 12 Handymax ice class 1A product tankers under our Newbuilding Program during 2014 as outlined in the table below. Additionally, TCE revenue per day in our Handymax segment increased to $14,528 from $12,862 during the years ended December 31, 2014 and 2013, respectively which was due to overall improvements in the spot market as demand increased across most trading routes. 66 82 % (312)% (6,000)% (23)% (321)% (281)% N/A 845 % 13 % 2 % 336 % 18 % 344 % 340 % 18 % Newbuilding Handymax ice class 1A product tankers delivered throughout 2014 Vessel 1 STI Comandante ......................... 2 STI Brixton ................................. 3 STI Pimlico ................................ 4 STI Hackney ............................... 5 STI Acton ................................... 6 STI Fulham ................................. 7 STI Camden ............................... 8 STI Battersea .............................. 9 STI Wembley ............................. 10 STI Finchley ............................... 11 STI Clapham .............................. 12 STI Poplar .................................. Delivery Date May 2014 June 2014 July 2014 August 2014 September 2014 September 2014 September 2014 October 2014 October 2014 November 2014 November 2014 December 2014 Vessel operating costs. Vessel operating costs for the year ended December 31, 2014 were $10.9 million, an increase of $8.3 million, or 312%, from the year ended December 31, 2013. This increase was due to an increase in vessel operating days offset by a decrease in operating costs per day. Owned vessel operating days increased to 1,620 from 365 days during the years ended December 31, 2014 and 2013, respectively. In 2013, STI Highlander was the only owned vessel operating in this segment whereas we took delivery of 12 ice class 1A Handymax tankers under our Newbuilding Program in 2014. Voyage expenses. Voyage expenses for the year ended December 31, 2014 were $0.7 million, an increase of $0.7 million, or 6,000%, from the year ended December 31, 2013. The increase was driven by the vessels delivered under our Newbuilding Program, which were employed on short-term time charters (up to 120 days) that commenced upon delivery from the shipyard for a total of 812 days during the year ended December 31, 2014. While these time charters are agreed to at fixed TCE rates, voyage costs are incurred for bunker costs (to the first load port), tank cleaning costs and other miscellaneous costs incurred prior to their entrance into the Scorpio Handymax Pool. Charterhire. Charterhire expense for the year ended December 31, 2014 was $38.4 million, an increase of $7.3 million, or 23%, from the year ended December 31, 2013. The increase was the result of an increase in the average number of time chartered-in vessels to 7.9 from 6.7 during the years ended December 31, 2014 and 2013, respectively. Krisjanis Valdemars, Kraslava, Histria Azure, Histria Perla, Histria Coral, Jinan, Iver Progress, Iver Prosperity and Freja Polaris were time chartered-in for a total of 2,450 days during the year ended December 31, 2013, whereas Histria Coral, Histria Perla, Histria Azure, Krisjanis Valdemars, Kraslava, Jinan and Freja Polaris were time chartered-in for a total of 2,887 days during the year ended December 31, 2014. Depreciation. Depreciation expense for the year ended December 31, 2014 was $5.4 million, an increase of $4.1 million, or 321%, from the year ended December 31, 2013. The increase was driven by the deliveries of the 12 ice class 1A Handymax tankers under our Newbuilding Program during the year ended December 31, 2014. General and administrative expenses. General and administrative expenses for the year ended December 31, 2014 were $0.5 million, an increase of $0.3 million, or 281% from the year ended December 31, 2013. General and administrative expenses for the Handymax segment primarily consist of administrative fees to SSH, which increased as a result of the increase in the average number of owned Handymax vessels to 4.4 from 1.0 for the years ended December 31, 2014 and 2013, respectively. B. Liquidity and Capital Resources Our primary source of funds for our short-term and long-term liquidity needs will be the cash flows generated from our vessels, which are currently operating in Scorpio Group Pools, in the spot market or on time charter, in addition to availability under our secured credit facilities with existing availability and cash on hand. We believe that the Scorpio Group Pools reduce volatility because (i) they aggregate the revenues and expenses of all pool participants and distribute net earnings to the participants based on an agreed upon formula and (ii) some of the vessels in the pool are on time charter. Furthermore, spot charters provide flexibility and allow us to fix vessels at prevailing rates. We believe these cash flows from operations, amounts available for borrowing under our various credit facilities and our cash balance will be sufficient to meet our existing liquidity needs for the next 12 months from the date of this annual report. As of December 31, 2015, our cash balance was $201.0 million, which was greater than our cash balance of $116.1 million as of December 31, 2014. 67 As of December 31, 2015, we had $166.5 million in availability under our secured credit facilities (which includes a $36.0 million commitment from Scotiabank Europe plc which remains subject to the execution of definitive documentation). All of our credit facilities are described below under Long-Term Debt Obligations and Credit Arrangements. Additionally, in March 2016, we amended and restated our ING Credit Facility to increase the borrowing capacity to $132.5 million from $87.0 million. As of December 31, 2015, our long-term liquidity needs were comprised of our debt repayment obligations for our secured credit facilities, Senior Unsecured Notes Due 2020 and 2017 (defined below), Convertible Notes (defined below), our obligations under construction contracts related to the vessels in our Newbuilding Program, and obligations under our time charter-in arrangements. Our secured credit facilities require us to comply with a number of covenants, including financial covenants related to liquidity, consolidated net worth, minimum interest coverage, maximum leverage ratios, loan to value ratios and collateral maintenance; delivery of quarterly and annual financial statements and annual projections; maintenance of adequate insurances; compliance with laws (including environmental); compliance with the Employee Retirement Income and Security Act, or ERISA; maintenance of flag and class of the initial vessels; restrictions on consolidations, mergers or sales of assets; approvals on changes in the manager of the vessels; limitations on liens; limitations on additional indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would occur as a result of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants. We drew down $43.3 million from our secured credit facilities in 2016 as described below: Credit Facility 1 BNP Paribas Credit Facility ..................................................... 2 ING Credit Facility .................................................................. Drawdown amount (in millions of U.S. dollars) $ 17.3 26.0 Drawdown date February 2016 March 2016 Collateral STI Battery(1) STI Grace(2) (1) We refinanced the outstanding indebtedness related to the STI Battery by repaying $18.2 million into our 2013 Credit Facility in January 2016 and drawing down $17.25 million from our BNP Paribas Credit Facility in February 2016. (2) In March 2016, we drew down $26.0 million on our ING Credit Facility to finance the final installment relating to the delivery of STI Grace, which is scheduled to occur on March 18, 2016. Cash Flows The table below summarizes our sources and uses of cash for the periods presented: In thousands of U.S. dollars Cash flow data Net cash inflow/(outflow) Operating activities ....................................................................................... Investing activities ........................................................................................ Financing activities ....................................................................................... For the year ended December 31, 2013 2014 2015 $ 391,975 (703,418) 396,270 $ 93,916 (1,158,234) 1,101,616 $ (5,655) (935,101) 932,436 68 Cash flow from operating activities Fiscal year ended December 31, 2015 compared to fiscal year ended December 31, 2014 Operating cash flows are driven by our results of operations along with movements in working capital. Both of these components were driven by our growth during 2015 and 2014. The following table sets forth the components of our operating cash flow for the years ended December 31, 2015 and December 31, 2014: For the year ended December 31, Percentage Change Change 2015 In thousands of U.S. dollars Vessel revenue ................................................................................... $ 755,711 $ 342,807 $ 412,904 Vessel operating costs ........................................................................ Voyage expenses ............................................................................... Charterhire ......................................................................................... General and administrative expenses - cash ...................................... Financial expenses - cash ................................................................... Drydock payments ............................................................................. Change in working capital ................................................................. Other .................................................................................................. Operating cash inflow ........................................................................ $ 391,975 $ (78,823) (174,556) (4,432) (7,533) (96,865) (139,168) (18,403) (32,144) (10,606) (61,082) (1,290) 6,334 598 (95,733) 3,101 42,303 (13,741) (50,476) 1,290 (2,974) 1,385 93,916 $ 298,059 — 3,360 1,983 2014 120 % (1) (121)% (1) 41 % (1) 30 % (1) (75)% (1)(2) (476)% (1)(3) 100 % (47)% (4) 232 % (5) 317 % (1) See “Item 5. Operating and Financial Review and Prospects- A. Operating Results” for information on these variations for the years ended December 31, 2015 and 2014. (2) Cash general and administrative expenses are general and administrative expenses from our consolidated statements of income excluding the amortization of restricted stock of $33.7 million and $29.7 million for the years ended December 31, 2015 and 2014, respectively. (3) Cash financial expenses are financial expenses from our consolidated statements of income excluding the amortization of deferred financing fees of $17.4 million and $4.8 million for the years ended December 31, 2015 and 2014, respectively, and the accretion of our Convertible Notes of $11.1 million and $5.3 million for the years ended December 31, 2015 and 2014, respectively. (4) The change in working capital in 2015 was primarily driven by the growth in accrued expenses and the decrease of accounts receivable, which were driven by growth in accrued short-term employee benefits and the timing of receipt of payments from the Scorpio Group Pools, respectively. These movements were offset by increases in inventory, other current assets and non-current assets which were impacted by working capital contributions made for our vessels operating in the Scorpio Group Pools. The change in working capital in 2014 was primarily driven by growth in accrued expenses and accounts payable which were impacted by the timing of payments to suppliers and growth in accrued interest. (5) The increase in other operating cash flows is primarily related to a $1.4 million gain recorded as a result of a termination fee received when the owner of one of the Company’s time chartered-in vessels cancelled the contract prior to its expiration date. Fiscal year ended December 31, 2014 compared to fiscal year ended December 31, 2013 The following table sets forth the components of our operating cash flow for the years ended December 31, 2014 and December 31, 2013: For the year ended December 31, Percentage 2014 In thousands of U.S. dollars Vessel revenue ................................................................................... $ 342,807 $ 207,580 $ 135,227 Vessel operating costs ........................................................................ Voyage expenses ............................................................................... Charterhire ......................................................................................... General and administrative expenses - cash ...................................... Financial expenses - cash ................................................................... Drydock payments ............................................................................. Change in working capital ................................................................. Other .................................................................................................. Operating cash inflow / (outflow) ...................................................... $ (40,204) (4,846) (139,168) (115,543) (12,646) (2,373) (1,469) (37,199) 1,045 (5,655) $ 99,571 (18,403) (10,606) (1,290) 6,334 598 93,916 $ (38,619) (2,687) (23,625) (5,757) (8,233) 179 43,533 (78,823) (7,533) (447) 2013 65 % (1) (96)% (1) (55)% (1) (20)% (1) (46)% (1)(2) (347)% (1)(3) 12 % 117 % (4) (43)% 1,761 % Change Change 69 (1) See “Item 5. Operating and Financial Review and Prospects- A. Operating Results” for information on these variations for the years ended December 31, 2014 and 2013. (2) Cash general and administrative expenses are general and administrative expenses from our consolidated statements of income excluding the amortization of restricted stock of $29.7 million and $13.1 million for the years ended December 31, 2014 and 2013, respectively. (3) Cash financial expenses are financial expenses from our consolidated statements of income excluding the amortization of deferred financing fees of $4.8 million and $0.3 million for the years ended December 31, 2014 and 2013, respectively. (4) The change in working capital in 2014 was primarily driven by growth in accrued expenses and accounts payable which were impacted by the timing of payments to suppliers and growth in accrued interest. The change in working capital in 2013 was primarily driven by growth in accounts receivable which were impacted by the timing of receipt of payments from the Scorpio Group Pools. Cash flow from investing activities The following table sets forth the components of our investing cash flow for the years ended December 31, 2015 and December 31, 2014: In thousands of U.S. dollars Cash inflows Net proceeds from the sale of our shares held in Dorian ............ $ 142,436 $ Net proceeds from the sale of our seven VLCCs 2015 Percentage 2014 Change Change N/A — $ 142,436 For the year ended December 31, under construction ................................................................... Net proceeds from the sales of vessels ....................................... Deposits received for vessel purchases ....................................... Total investing cash inflows ....................................................... — 90,820 — 233,256 141,710 71,960 31,277 244,947 (141,710) 18,860 (31,277) (11,691) Cash outflows Final delivery installments and other costs ................................. Scheduled installment payments and other costs ........................ Purchase of STI Memphis (2014-built) ...................................... Deposits returned for vessel purchases ....................................... Other ........................................................................................... Total investing cash outflows ..................................................... (749,453) (118,205) (37,628) (31,277) (111) (936,674) (1,097,847) (305,334) — — — (1,403,181) 348,394 187,129 (37,628) (31,277) (111) 466,507 (100)% 26 % (1) (100)% (2) (5)% 32 % (3) 61 % (4) N/A N/A (2) N/A 33 % Net cash outflow from investing activities ................................. $ (703,418) $ (1,158,234) $ 454,816 39 % (1) Net proceeds from the sales of vessels in 2015 represents the net proceeds received from sales of Venice, STI Harmony, STI Heritage and STI Highlander. Net proceeds from the sales of vessels in 2014 represents the net proceeds received from the sales of Noemi, Senatore and STI Spirit. (2) In 2014, we received a $31.3 million deposit pursuant to an agreement to purchase four LR2 tankers from Scorpio Bulkers Inc., a related party. We received this deposit as security for the scheduled installment payments that were expected to occur prior to the closing date of the transaction. The transaction closed, and the deposits were returned, in July 2015. (3) Represents final installment payments and other capitalized costs associated with vessels that were delivered during the years ended December 31, 2015 and 2014, respectively. (4) Represents installment payments and other capitalized costs associated with vessels that were under construction during the years ended December 31, 2015 and 2014, respectively. 70 The following table sets forth the components of our investing cash flow for the years ended December 31, 2014 and December 31, 2013: In thousands of U.S. dollars Cash inflows Net proceeds from the sale of seven VLCCs under construction ............ $ Net proceeds from the sales of vessels .................................................... Deposits received for vessel purchases .................................................... Total investing cash inflows .................................................................... For the year ended December 31, Percentage 2014 2013 Change Change 141,710 $ 71,960 31,277 244,947 — $ 141,710 71,960 — — 31,277 — 244,947 N/A N/A N/A N/A (1) (2) Cash outflows Final delivery installments and other costs .............................................. Scheduled installment payments and other costs ..................................... Payments made related to our investment in Dorian ............................... Total investing cash outflows .................................................................. (1,097,847) (305,334) — (1,403,181) (149,384) (948,463) (618,064) 312,730 (167,653) 167,653 (935,101) (468,080) (635)% (3) 51 % (4) 100 % (5) (50)% Net cash outflow from investing activities .............................................. $(1,158,234) $(935,101) $(223,133) (24)% (1) Represents net proceeds received in 2014 from the sales of Noemi, Senatore and STI Spirit. (2) In 2014, we received a $31.3 million deposit pursuant to an agreement to purchase four LR2 tankers from Scorpio Bulkers Inc., a related party. We received this deposit as security for the scheduled installment payments that were expected to occur prior to the closing date of the transaction. The transaction closed, and the deposits were returned, in July 2015. (3) Represents final installment payments and other capitalized costs associated with vessels that were delivered during the years ended December 31, 2014 and 2013, respectively. (4) Represents installment payments and other capitalized costs associated with vessels that were under construction during the years ended December 31, 2014 and 2013, respectively. (5) Payments made related to Dorian represent: (i) $83.1 million of installment payments to the shipyards for 11 VLGC contracts, (ii) a $75 million investment in Dorian’s November 2013 follow-on offering, (iii) $7.7 million in legal and advisory fees and (iv) $2.3 million cash contribution and other capitalized costs. Cash flow from financing activities Cash flows from financing activities primarily consist of the issuance, repayment and costs related to our secured and unsecured debt, the issuance and costs related to our common stock, the payment of dividends to our common shareholders and activity within our Securities Repurchase Program and stock buyback programs. Descriptions of these facilities and programs are provided after the tables of cash flows from financing activities. 71 The following table sets forth the components of our financing cash flow for the years ended December 31, 2015 and December 31, 2014: For the year ended December 31, Percentage In thousands of U.S. dollars Cash inflows Drawdowns from our secured credit facilities ................................... $ 643,550 $ 1,114,284 $ (470,734) Gross proceeds from the issuance of our Convertible Notes ............. (360,000) Gross proceeds from the issuance of our senior unsecured 360,000 2014 2015 — notes due 2020 and 2017 ................................................................ Gross proceeds from the issuance of common stock ......................... Total financing cash inflows .............................................................. — 159,747 803,297 105,500 — 1,579,784 (105,500) 159,747 (776,487) (42)% (1) (100)% (100)% N/A (49)% Change Change Cash outflows Repayments on our secured credit facilities ...................................... Dividend payments ............................................................................ Common stock repurchases ............................................................... Debt issuance costs ............................................................................ Equity issuance costs ......................................................................... Repurchase of our Convertible Notes ................................................ Convertible Notes issuance costs ....................................................... Total financing cash outflows ............................................................ (226,260) (87,056) (76,028) (8,497) (7,554) (1,632) — (407,027) (74,674) (151,586) (70,495) (16,561) (276,294) 200,266 37,173 (45,670) (7,512) (42) (1,632) — 10,993 71,141 (10,993) (478,168) (203)% (1) (23)% 72 % (2) 81 % (3) (17,886)% N/A 100 % 15 % Net cash inflow from financing activities .......................................... $ 396,270 $ 1,101,616 $ (705,346) (64)% (1) Drawdowns from and repayments on our secured credit facilities in 2015 and 2014 consisted of: 2015 2014 Drawdowns Repayments Drawdowns Repayments In thousands of U.S. dollars 2010 Revolving Credit Facility ...................................... 2011 Credit Facility ....................................................... STI Spirit Credit Facility ............................................... Newbuilding Credit Facility .......................................... 2013 Credit Facility ....................................................... K-Sure Credit Facility .................................................... KEXIM Credit Facility .................................................. Nomura Term Margin Loan Facility .............................. ING Credit Facility ........................................................ ABN AMRO Credit Facility .......................................... BNP Paribas Credit Facility ........................................... Finance lease payments - STI Lombard ......................... $ $ — — — — 127,700 261,100 30,300 30,000 35,000 142,200 17,250 — 643,550 $ $ (41,456) $ 72,416 52,008 — — 393,400 197,160 399,300 — — — — — (226,260) $ 1,114,284 (7,935) — (5,998) (83,970) (18,261) (29,350) (30,000) (292) (2,370) — (6,628) $ $ (30,960) (7,103) (21,736) (5,998) (8,877) — — — — — — — (74,674) (2) Common stock repurchases in 2015 included the purchase of 8,273,709 common shares in the open market at an average price of $9.19 per share. Common stock repurchases in 2014 included the purchase of 19,951,536 common shares in the open market at an average price of $9.09 per share and the purchase of 10,127,600 common shares at $9.38 per share using a portion of the proceeds of our Convertible Notes. (3) Debt issuance costs relates to costs incurred for our secured credit facilities and senior unsecured notes due 2020 and 2017 (as defined below). 72 The following table sets forth the components of our financing cash flows for the years ended December 31, 2014 and December 31, 2013: For the year ended December 31, Percentage In thousands of U.S. dollars Cash inflows Drawdowns from our secured credit facilities ............................. $ 1,114,284 $ Gross proceeds from the issuance of our Convertible Notes ....... Gross proceeds from the issuance of our senior 360,000 2014 2013 Change Change 52,050 $ 1,062,234 360,000 — 2,041 % (1) N/A unsecured notes ........................................................................ Gross proceeds from the issuance of common stock ................... Total financing cash inflows ........................................................ 105,500 — 1,579,784 — 983,537 1,035,587 105,500 (983,537) 544,197 N/A (100)% 53 % Cash outflows Repayments on our secured credit facilities ................................ Dividend payments ...................................................................... Repurchases of common stock .................................................... Debt issuance costs ...................................................................... Equity issuance costs ................................................................... Convertible Notes issuance costs ................................................. Total financing cash outflows ...................................................... (74,674) (70,495) (276,294) (45,670) (42) (10,993) (478,168) (28,410) (24,353) — (14,693) (35,695) — (103,151) (46,264) (46,142) (276,294) (30,977) 35,653 (10,993) (375,017) (163)% (1) (189)% (2) N/A (211)% (3) 100 % N/A (364)% Net cash inflow from financing activities .................................... $ 1,101,616 $ 932,436 $ 169,180 18 % (1) Drawdowns from and repayments on our secured facilities in 2014 and 2013 consisted of: In thousands of U.S. dollars 2010 Revolving Credit Facility ................................. 2011 Credit Facility .................................................. Spirit Credit Facility ................................................. Newbuilding Credit Facility ..................................... 2013 Credit Facility .................................................. K-Sure Credit Facility ............................................... KEXIM Credit Facility ............................................. 2014 2013 Drawdowns Repayments Drawdowns Repayments $ 72,416 52,008 — — 393,400 197,160 399,300 $ 1,114,284 $ $ (30,960) $ (7,103) (21,736) (5,998) (8,877) — — (74,674) $ — 52,050 — — — — — 52,050 $ $ (17,239) (3,516) (1,657) (5,998) — — — (28,410) (2) Common stock repurchases in 2014 included the purchase of 19,951,536 common shares in the open market at an average price of $9.09 per share and the purchase of 10,127,600 common shares at $9.38 per share using a portion of the proceeds of our Convertible Notes. (3) Debt issuance costs in 2014 include costs relating to our secured credit facilities and senior unsecured notes. Debt issuance costs in 2013 include costs relating to our secured credit facilities. 73 Long-Term Debt Obligations and Credit Arrangements The following is a table summarizing our indebtedness as of December 31, 2015 and as of March 17, 2016: In thousands of U.S. dollars 2011 Credit Facility ................................................ Newbuilding Credit Facility ................................... 2013 Credit Facility ................................................ K-Sure Credit Facility ............................................. KEXIM Credit Facility ........................................... Credit Suisse Credit Facility ................................... ING Credit Facility ................................................. ABN AMRO Credit Facility ................................... BNP Paribas Credit Facility .................................... Scotiabank Credit Facility ...................................... Senior unsecured notes ........................................... Convertible Notes ................................................... Finance Lease ......................................................... Amount outstanding at December 31, 2015 $ Amount Outstanding at March 17, 2016 100,976 $ 71,843 410,053 406,706 383,425 — 60,417 137,460 33,925 — 105,500 358,500 53,040 2,121,845 $ Availability as of the date of this report $ $ — — —(1) —(2) —(3) 61,200(4) 71,500(5) — —(1) 36,000(6) — —(7) — 168,700 100,976 71,843 428,253 440,000 400,250 — 34,708 139,830 17,250 — 105,500 358,500 53,372 2,150,482 $ (1) In January 2016, $18.2 million was repaid on our 2013 Credit Facility and $17.25 million was drawn in February 2016 from our BNP Paribas Credit Facility as part of the refinancing of the amounts borrowed for STI Battery. (2) In March 2016, we sold STI Lexington for $33.3 million and as a result of the sale, we repaid $18.4 million on our K-Sure Credit Facility. We also made a scheduled principal payment into this facility of $14.9 million in January 2016. (3) We made scheduled principal payments into this facility of $16.8 million in aggregate from January 1, 2016 through March 17, 2016. (4) We entered into a senior secured term loan facility with Credit Suisse AG in March 2015. The availability of this facility can be used to finance the lesser of $30.6 million and 60% of each vessel’s fair market value at the respective drawdown dates. (5) In March 2016, we amended and restated our $87.0 million credit facility with ING Bank N.V. to increase the borrowing capacity to $132.5 million. The proceeds are expected to be utilized to finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015-built). In March 2016, we drew down $26.0 million on our ING Credit Facility to finance the delivery of STI Grace, which is scheduled to occur on March 18, 2016. (6) In December 2015, we received a commitment from Scotiabank Europe plc for a loan facility of up to $36.0 million which is expected to be used to refinance the existing indebtedness on an LR2 product tanker (2015-built). This facility has a maturity of three years from the drawdown date and bears interest at LIBOR plus a margin of 1.50% per annum. (7) As of December 31, 2015, $44.7 million of this amount has been attributed to the conversion feature of our Convertible Notes and recorded within additional paid in capital on the consolidated balance sheet. The following is a discussion of the key terms and conditions of our secured credit facilities, unsecured senior notes, finance lease and our Convertible Notes. Our secured credit facilities may be secured by, among other things: • a first priority mortgage over the relevant collateralized vessels; • a first priority assignment of earnings, insurances and charters from the mortgaged vessels for the specific facility; • a pledge of earnings generated by the mortgaged vessels for the specific facility; and • a pledge of the equity interests of each vessel owning subsidiary under the specific facility. 74 2010 Revolving Credit Facility On June 2, 2010, we executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DNB Bank ASA, acting through its New York branch, and ABN AMRO Bank N.V, for a senior secured term loan facility of up to $150 million. On July 12, 2011, we amended and restated the credit facility to convert it from a term loan to a reducing revolving credit facility. This facility matured in June 2015 and all amounts due were settled. The activity during the years ended December 31, 2015 and 2014 is as follows: • • • • In January 2014, we drew down $72.4 million and in March 2014, we paid $22.5 million into this facility as a result of the sales of Noemi and Senatore. We also wrote-off a total of $0.2 million of deferred financing fees as part of these debt repayments. In March 2015, we paid $6.1 million into this facility as a result of the sale of Venice (in addition to a $1.8 million scheduled principal payment relating to STI Harmony, STI Heritage and STI Highlander). In April 2015, we paid $25.6 million into this facility as a result of the sales of STI Harmony and STI Heritage. We also wrote-off a total of $21,465 of deferred financing fees as part of these debt repayments. In June 2015, the 2010 Revolving Credit Facility matured and we made an $8.0 million principal payment to settle all amounts outstanding. The mortgage on STI Highlander (the only vessel collateralized under this facility at the time) was released. 2011 Credit Facility On May 3, 2011, we executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DNB Bank ASA, acting through its New York branch, and ABN AMRO Bank N.V., for a senior secured term loan facility of up to $150.0 million. This credit facility bears interest at LIBOR plus an applicable margin of (i) 3.25% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and (ii) 3.50% per annum when our debt to capitalization ratio is greater than 50%. The credit facility matures on May 3, 2017 and the availability under this credit facility expired on January 31, 2014. Borrowings for each vessel financed under this facility represent a separate tranche, with repayment terms dependent on the age of the vessel at acquisition. Each tranche under the credit facility is repayable in equal quarterly installments, with a lump sum payment at maturity, based on a full repayment of such tranche when the vessel to which it relates is 16 years of age. Our subsidiaries, which may at any time, own one or more of our vessels, act as guarantors under the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. The financial covenants include: • The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00. • Consolidated tangible net worth (i.e. shareholders’ equity) shall be no less than $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and 50% of the value of any new equity issues from July 1, 2010 going forward. • The ratio of EBITDA to interest expense shall be no less than 2.00 to 1.00. Such ratio shall be calculated quarterly on a trailing four quarter basis. In addition, we are restricted from paying dividends unless our EBITDA to interest expense ratio is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment. 75 • Consolidated liquidity (defined as cash and cash equivalents) must not be less than $25 million, of which unrestricted cash and cash equivalents shall be not less than $15.0 million, until we own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional vessel. • The aggregate fair market value of the collateral vessels shall at all times be no less than 150% of the then aggregate outstanding principal amount of loans under the credit facility. In January 2014, we drew down $52.0 million from the 2011 Credit Facility. In connection with this drawdown, STI Duchessa, STI Le Rocher and STI Larvotto were provided as collateral under the facility. The outstanding balances at December 31, 2015 and December 31, 2014 were $101.0 million and $108.9 million, respectively, and the availability under this credit facility expired on January 31, 2014. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Newbuilding Credit Facility On December 21, 2011, we executed a credit facility agreement with Credit Agricole Corporate and Investment Bank and Skandinaviska Enskilda Banken AB for a senior secured term loan facility of up to $92.0 million. During the year ended December 31, 2012, we drew down an aggregate of $92.0 million from this facility to partially finance the deliveries of STI Amber, STI Topaz, STI Ruby and STI Garnet ($23.0 million per vessel). These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. Borrowings under the credit facility bear interest at LIBOR plus an applicable margin of 2.70% per annum. The facility was fully drawn as of December 31, 2012. All terms mentioned in this section are defined in the agreement. The facility is separated into four tranches (one per each vessel) and repayment of the tranche relating to the respective vessel commenced after delivery of that vessel in quarterly installments of $375,000, which equates to a repayment profile of 15.33 years. Each tranche is scheduled to mature approximately seven years after delivery of the relevant vessel from the shipyard. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. The financial covenants include: • The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00. • Consolidated tangible net worth (i.e. shareholders equity) shall be no less than $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and 50% of the value of any new equity issues from July 2, 2010 going forward. • The ratio of EBITDA to interest expense shall be no less than 2.50 to 1.00. Such ratio shall be calculated quarterly on a trailing four quarter basis. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the collateral vessels shall at all times be no less than 140% (120% if the vessel is subject to acceptable long term employment) of the aggregate principal amount outstanding plus a pro rata amount of any allocable swap exposure for the credit facility. In March 2014, we converted the Newbuilding Credit Facility from a term loan to a reducing revolving credit facility. This gives us the ability to draw-down and repay the available commitments under the facility when needed. All other terms and definitions remain unchanged. The amount available is reduced by $1.5 million each quarter until the maturity date in June 2019. This transaction was accounted for as a debt modification and accordingly, no deferred financing fees were written off. 76 The amounts outstanding under this facility as of December 31, 2015 and 2014 were $71.8 million and $77.8 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. 2013 Credit Facility On July 2, 2013, we entered into a senior secured revolving credit facility and term loan facility with Nordea Bank Finland plc and the other lenders named therein of up to $525.0 million to finance the acquisition of certain vessels for which we previously entered into newbuilding contracts. This credit facility is secured by, among other things, a first-priority cross- collateralized mortgage on the vessels collateralized under the facility (the “Collateral Vessels”). Our subsidiaries that own the Collateral Vessels act as joint and several guarantors under our 2013 Credit Facility. We refer to this credit facility as our 2013 Credit Facility. Drawdowns of the term loan occurred in connection with the delivery of a Collateral Vessel in an amount equal to the lesser of 60% of (i) the contract price for such vessel or (ii) such vessel’s fair market value. Drawdowns of the revolving credit facility occurred in connection with the delivery of a Collateral Vessel and are also capped at the lesser of 60% of (i) the contract price for such vessel or (ii) such vessel’s fair market value, with such amount, once drawn, available on a revolving basis. Drawdowns under the term loan and revolving loan bear interest at LIBOR plus an applicable margin of 3.50%. Each facility was fully drawn in 2015. The term loan is repayable and the revolving loans reduced, in each case, in an amount equal to 1/60th of such loan on a consecutive quarterly basis until final maturity on the sixth anniversary of the facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our 2013 Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than (i) $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter beginning on July 1, 2010 and (ii) 50% of the value of any new equity issues from July 1, 2010 going forward. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the Collateral Vessels shall at all times be no less than 140% of the then aggregate outstanding principal amount of loans under the credit facility. In November 2014, we signed a First Amendatory Agreement to the 2013 Credit Facility to replace four Handymax product tankers with two LR2 product tankers that were under construction. As a result of this agreement, the availability under the revolving credit facility was reduced by $2.1 million to $262.9 million. In May 2015, we signed a Second Amendatory Agreement to the 2013 Credit Facility to replace two Handymax product tankers with an LR2 product tanker that was under construction. As a result of this agreement, the availability under the revolving credit facility was reduced by $1.8 million to $261.1 million. 77 We made the following drawdowns from our 2013 Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $35.4 19.5 19.3 35.1 18.5 Drawdown date January 2015 March 2015 April 2015 June 2015 June 2015 Collateral STI Alexis STI Pontiac STI Osceola STI Spiga STI Seneca (1) (2) (1) In October 2015, we refinanced the amount borrowed relating to STI Pontiac by repaying $18.9 million on our 2013 Credit Facility and drawing down $17.5 million under our ING Credit Facility (as described below). (2) In July 2015, we refinanced the amount borrowed relating to STI Spiga by repaying $35.1 million on our 2013 Credit Facility and drawing down $35.1 million under our ABN AMRO Credit Facility (as described below). The amounts outstanding relating to this facility as of December 31, 2015 and 2014 were $428.3 million and $384.5 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. K-Sure Credit Facility In February 2014, we entered into a $458.3 million senior secured term loan facility which consists of a $358.3 million tranche with a group of financial institutions that is being 95% covered by Korea Trade Insurance Corporation (the “K-Sure Tranche”) and a $100.0 million commercial tranche with a group of financial institutions led by DNB Bank ASA (the “Commercial Tranche”). We refer to this credit facility as our K-Sure Credit Facility. Drawdowns under the K-Sure Credit Facility occurred in connection with the delivery of certain of our newbuilding vessels as specified in the agreement. The amount of each drawdown did not exceed the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel. Drawdowns were available until the earlier of (i) the delivery date of the last vessel specified in the agreement to be acquired, (ii) September 30, 2015 and (iii) the date on which the total commitments under the loan are fully borrowed, cancelled or terminated. Repayments will be made in equal consecutive six month repayment installments in accordance with a 15 year repayment profile under the Commercial Tranche and a 12 year repayment profile under the K-Sure Tranche. Repayments commenced in July 2015 for the K-Sure Tranche and September 2015 for the Commercial Tranche. The Commercial Tranche matures on the sixth anniversary of the delivery date of the last vessel to be acquired and the K-Sure Tranche matures in January 2027 assuming the Commercial Tranche is refinanced through that date. Borrowings under the K-Sure tranche bear interest at LIBOR plus an applicable margin of 2.25%. Borrowings under the Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date in respect of the Commercial Tranche. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our K-Sure Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of any new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. 78 • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of loans under the credit facility. We made the following drawdowns from our K-Sure Credit Facility during the year ended December 31, 2015: Drawdown amount(in millions of U.S. dollars) $19.9 19.5 19.5 30.3 30.3 19.5 30.3 30.3 21.0 21.0 19.5 Drawdown date January 2015 February 2015 March 2015 March 2015 April 2015 April 2015 April 2015 April 2015 May 2015 June 2015 July 2015 Collateral STI Gramercy STI Bronx STI Manhattan STI Winnie STI Oxford STI Queens STI Lauren STI Connaught STI Notting Hill STI Westminster STI Brooklyn The amounts outstanding relating to this facility as of December 31, 2015 and 2014 were $440.0 million and $197.2 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. KEXIM Credit Facility In February 2014, we executed a senior secured term loan facility for $429.6 million, or the KEXIM Credit Facility, with a group of financial institutions led by DNB Bank ASA and Skandinaviska Enskilda Banken AB (publ) and from the Export-Import Bank of Korea, or KEXIM, a statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea. This KEXIM Credit Facility includes commitments from KEXIM of up to $300.6 million, or the “KEXIM Tranche” and a group of financial institutions led by DNB Bank ASA and Skandinaviska Enskilda Banken AB (publ) of up to $129.0 million, or the “Commercial Tranche”. Drawdowns under the KEXIM Credit Facility occurred in connection with the delivery of 18 vessels under our Newbuilding Program as specified in the loan agreement. The amount of each drawdown did not exceed the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel. Drawdowns were available until the earlier of (i) the delivery date of the last vessel specified in the agreement to be acquired, (ii) March 31, 2015 and (iii) the date on which the total commitments under the loan are fully borrowed, cancelled or terminated. In addition to KEXIM’s commitment of up to $300.6 million, KEXIM also provided an optional guarantee for a five year amortizing note of $125.25 million, the proceeds of which reduce the $300.6 million KEXIM Tranche. These notes were issued on July 18, 2014 when Seven and Seven Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands, or the “Issuer”, completed an offering of $125,250,000 in aggregate principal amount of floating rate guaranteed notes due 2019, or the “KEXIM Notes” in a private offering to qualified institutional buyers pursuant to the Securities Act and in offshore transactions complying with Regulation S under the Securities Act. The KEXIM Notes were issued in connection with the KEXIM Tranche and reduced KEXIM’s funding obligations and our borrowing costs under KEXIM Tranche by 1.55% per year. Seven and Seven Ltd. is an unaffiliated company that was incorporated for the purpose of facilitating this transaction and servicing the bonds until maturity. Payment of 100% of all regularly scheduled installments of principal of, and interest on, the KEXIM Notes are guaranteed by KEXIM. The vessels in the loan are the collateral for the KEXIM Credit Facility, which includes the KEXIM Notes. The KEXIM Notes are currently listed to the Singapore Exchange Securities Trading Limited, or the “SGX-ST”. The KEXIM Notes are not listed on any other securities exchange, listing authority or quotation system. The Commercial Tranche matures on the sixth anniversary of the delivery date of the last vessel specified under the loan (September 2020) and the KEXIM Tranche matures on the twelfth anniversary of the weighted average delivery date of the vessels specified under the loan assuming the Commercial Tranche is refinanced through that date (September 2026). 79 Repayments will be made in equal consecutive semi-annual repayment installments in accordance with a 15 year repayment profile under the Commercial Tranche and a 12 year repayment profile under the KEXIM Tranche (which includes the KEXIM Notes). Repayments under the KEXIM Tranche will first be applied to the KEXIM Notes until the maturity of those notes in September 2019 and all subsequent repayments will applied to the remaining amounts outstanding under KEXIM Tranche until the maturity of that tranche in September 2026 (assuming the Commercial Tranche is refinanced through that date). Repayments commenced in March 2015 for the KEXIM Tranche and in July 2015 for the Commercial Tranche. Borrowings under the KEXIM Tranche bear interest at LIBOR plus an applicable margin of 3.25%. Borrowings under the Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date in respect of the Commercial Tranche. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our KEXIM Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of any new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of loans under the credit facility. We made the following drawdown from our KEXIM Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $30.3 Drawdown date January 2015 Collateral STI Veneto The amounts outstanding relating to this facility (which includes the KEXIM Notes) as of December 31, 2015 and 2014 were $400.3 million and $399.3 million respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. ABN AMRO Credit Facility In July 2015, we executed a senior secured term loan facility with ABN AMRO Bank N.V. and DVB Bank SE for up to $142.2 million. This facility was fully drawn in 2015 to partially finance the purchases of STI Savile Row, STI Kingsway and STI Carnaby and to refinance the existing indebtedness on STI Spiga. We refer to this credit facility as our ABN AMRO Credit Facility. Repayments under the ABN AMRO Credit Facility will be made in equal consecutive quarterly repayment installments in accordance with a 15 year repayment profile. Repayments commenced three months after the drawdown date of each vessel. Each tranche matures on the fifth anniversary of the initial drawdown date and a balloon installment payment is due on the maturity date of each tranche. Borrowings under the ABN AMRO Credit Facility bear interest at LIBOR plus an applicable margin of 2.15%. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. 80 The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our ABN AMRO Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 140% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns from our ABN AMRO Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $35.7 35.1 35.7 35.7 Drawdown date July 2015 August 2015 August 2015 September 2015 Collateral STI Savile Row STI Spiga STI Kingsway STI Carnaby (1) (1) In July 2015, we refinanced the amount borrowed relating to STI Spiga by repaying $35.1 million on our 2013 Credit Facility and drawing down $35.1 million from our ABN AMRO Credit Facility. The outstanding balance at December 31, 2015 was $139.8 million and the facility was fully drawn as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. ING Credit Facility In June 2015, we executed a senior secured term loan facility with ING Bank N.V., London Branch for a credit facility of up to $52.0 million. In September 2015, we amended and restated the facility to increase the borrowing capacity to $87.0 million and in March 2016, we amended and restated the facility to increase the borrowing capacity to $132.5 million. The facility was used to partially finance the delivery of STI Black Hawk ($17.5 million in September 2015), refinance the existing indebtedness of STI Pontiac ($17.5 million in October 2015), partially finance the delivery of STI Grace ($26.0 million in March 2016) and will be used to partially finance the delivery of an LR2 that is currently under construction with delivery expected in the second quarter of 2016, to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015-built). We refer to this facility as our ING Credit Facility. Drawdowns shall not exceed $26.0 million or 47.5% of the fair market value of each vessel for the two LR2s currently under construction $28.0 million or 47.5% of the fair market value for STI Lombard and $17.5 million or 47.5% of the fair market value for the 2015-built MR product tanker. Repayments on all borrowings will be made in equal consecutive quarterly installments, in accordance with a 15 year repayment profile with the first installment falling due three calendar months after the drawdown date and a balloon installment payment which is due on the maturity date of June 24, 2022. Borrowings under the ING Credit Facility bear interest at LIBOR plus a margin of 1.95% per annum. A commitment fee equal to 40% of the applicable margin is payable on the unused daily portion of the credit facility. 81 The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our ING Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization not more than 0.60 to 1:00. • Consolidated tangible net worth of not less than $677.3 million plus (a) 25% of the positive consolidated net income for each fiscal quarter commencing on or after October 1, 2013 and (b) 50% of the value of the equity proceeds realized from any issuance of equity interests occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns on our ING Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $17.5 17.5 Drawdown date September 2015 October 2015 Collateral STI Black Hawk STI Pontiac (1) (1) In October 2015, we refinanced the amount borrowed relating to STI Pontiac by repaying $18.9 million on our 2013 Credit Facility and drawing down $17.5 million under our ING Credit Facility. The outstanding balance was $34.7 million as of December 31, 2015 and there was $52.0 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. BNP Paribas Credit Facility In December 2015, we executed a senior secured term loan facility with BNP Paribas SA for up to $34.5 million. In December 2015, we drew down $17.25 million and placed STI Memphis as collateral under this facility. The remaining proceeds of $17.25 million were used to refinance the existing indebtedness on STI Battery in February 2016. These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. We refer to this facility as our BNP Paribas Credit Facility. Repayments on all borrowings will be made in equal consecutive quarterly installments, in accordance with a 15 year repayment profile with the first installment falling due on February 29, 2016 and subsequent installments falling due at consecutive intervals of three calendar months thereafter. A final balloon payment is due on the maturity date of December 18, 2020. The facility bears interest at LIBOR plus a margin of 1.95% per annum and a commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. 82 Our BNP Paribas Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 140% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns from our BNP Paribas Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $17.3 Drawdown date December 2015 Collateral STI Memphis The outstanding balance was $17.25 million as of December 31, 2015, and there was $17.25 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Credit Suisse Credit Facility In October 2015, we executed a senior secured term loan facility with Credit Suisse AG, Switzerland for up to $61.2 million. The proceeds of this facility will be used to finance a portion of the purchase price of two LR2 product tankers currently under construction at SSME with expected deliveries in the third and fourth quarters of 2016. These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. We refer to this facility as our Credit Suisse Credit Facility. Drawdowns shall not exceed the lesser of $30.6 million or 60% of the fair market value of each vessel. Repayments will be made in accordance with a 15 year repayment profile and will commence three calendar months after the drawdown date in respect of each tranche with subsequent installments falling due at consecutive intervals of three calendar months thereafter. A balloon payment is due on the maturity date of five years from the date of delivery of each vessel. The facility will bear interest at LIBOR plus a margin ranging between 1.95% and 2.40% per annum (depending on the advance ratio). A commitment fee equal to 1% of the amounts available is payable on the unused daily portion of this facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our Credit Suisse Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of the loans under the credit facility. 83 There were no amounts borrowed as of December 31, 2015 and there was $61.2 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Scotiabank Credit Facility In November 2015, we received a commitment from Scotiabank Europe plc for a loan facility of up to $36.0 million. The loan facility is expected to be used to refinance the existing indebtedness on one LR2 product tanker (2015- built), has a final maturity of three years from the drawdown date and bears interest at LIBOR plus a margin of 1.50% per annum. The loan facility is subject to customary conditions precedent and the execution of definitive documentation. Nomura Term Margin Loan Facility In March 2015, we entered into a term margin loan facility with Nomura Securities International, Inc. for up to $30.0 million. The 9,392,083 shares that we owned in Dorian were pledged as collateral under this facility, and we were subject to certain covenants, including a loan to value ratio based on the amount outstanding and the market value of the shares that serve as collateral. Interest on the facility was LIBOR plus 4.50% per annum. This facility was drawn in March 2015 and repaid as part of the sale of our investment in Dorian in July 2015. Unsecured Senior Notes Due 2020 On May 12, 2014, we issued $50.0 million in aggregate principal amount of 6.75% Senior Notes due May 2020, or our Senior Notes Due 2020, and on June 9, 2014, we issued an additional $3.75 million aggregate principal amount of Senior Notes Due 2020 when the underwriters partially exercised their option to purchase additional Senior Notes Due 2020 on the same terms and conditions. The net proceeds from the issuance of the Senior Notes Due 2020 were $51.8 million after deducting the underwriters’ discounts, commissions and offering expenses. The Senior Notes Due 2020 bear interest at a coupon rate of 6.75% per year, payable quarterly in arrears on the 15th day of February, May, August and November of each year. Coupon payments commenced on August 15, 2014. The Senior Notes Due 2020 are redeemable at our option, in whole or in part, at any time on or after May 15, 2017 at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Senior Notes Due 2020 are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured and unsubordinated debt and are effectively subordinated to our existing and future secured debt, to the extent of the value of the assets securing such debt, and will be structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. No sinking fund is provided for the Senior Notes Due 2020. The Senior Notes Due 2020 were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and are listed on the NYSE under the symbol “SBNA.” The Senior Notes Due 2020 require us to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would occur as a result of such payment. If we undergo a change of control, holders may require us to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date. The financial covenants under our Senior Notes Due 2020 include: • Net borrowings shall not equal or exceed 70% of total assets. • Net worth shall always exceed $650.0 million. The outstanding balance was $53.75 million as of December 31, 2015 and December 31, 2014, and we were in compliance with the financial covenants relating to the Senior Notes Due 2020 as of that date. Convertible Senior Notes Due 2019 In June 2014, we issued $360.0 million in aggregate principal amount of convertible senior notes due 2019, or the Convertible Notes, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. This amount includes the full exercise of the initial purchasers’ option to purchase an additional $60.0 million in aggregate principal amount of the Convertible Notes in connection with the offering. The net proceeds we received from the issuance of 84 the Convertible Notes after the exercise of the initial purchasers’ option to purchase additional Convertible Notes were $349.0 million after deducting the initial purchasers’ discounts, commissions and offering expenses of $11.0 million. As part of the transaction, we used a portion of the net proceeds to repurchase $95.0 million of our common stock, or 10,127,600 shares, at $9.38 per share in a privately negotiated transaction. The Convertible Notes bear interest at a coupon rate of 2.375% per annum, and are payable semi-annually in arrears on January 1 and July 1 of each year beginning on January 1, 2015. The Convertible Notes will mature on July 1, 2019, unless earlier converted, redeemed or repurchased. At issuance, the Convertible Notes were convertible in certain circumstances and during certain periods at an initial conversion rate of 82.0075 shares of common stock per $1,000 (which represents an initial conversion price of approximately $12.19 per share of common stock), subject to adjustment in certain circumstances as set forth in the indenture governing the Convertible Notes. Adjustments were made during years ended December 31, 2015 and 2014 to the initial conversion rate as a result of the issuance of dividends to our common stockholders. The table below details the dividends declared from the issuance of the Convertible Notes on June 30, 2014 through March 17, 2016 and their corresponding effect to the conversion rate of the Convertible Notes. The conversion rate as of December 31, 2015 was 88.6790. Record Date August 22, 2014 ........................... November 25, 2014 ...................... March 13, 2015............................. May 21, 2015 ................................ August 14, 2015 ........................... November 24, 2015 ...................... March 10, 2016............................. (1) Per $1,000 principal amount. Dividends per share Share Adjusted Conversion Rate (1) $ $ $ $ $ $ $ 0.100 0.120 0.120 0.125 0.125 0.125 0.125 82.8556 84.0184 85.2216 86.3738 87.4349 88.6790 90.5311 Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding January 1, 2019 only under the following circumstances: • during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 15 trading days (whether or not consecutive) during a period of 25 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined below) per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; • if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or • upon the occurrence of specified corporate events as defined in the indenture (e.g. consolidations, mergers, a binding share exchange or the transfer or lease of all or substantially all of our assets). We may not redeem the Convertible Notes prior to July 6, 2017. We may redeem for cash all or any portion of the notes, at our option, on or after July 6, 2017 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 15 trading days (whether or not consecutive) during any 25 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes. The Convertible Notes require us to comply with certain covenants such as restrictions on consolidations, mergers or sales of assets. Additionally, if we undergo a fundamental change, holders may require us to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. 85 We determined the initial carrying value of the liability component of the Convertible Notes to be $298.7 million based on the fair value of a similar liability that does not have any associated conversion feature. We used our Senior Notes Due 2020 issued in May 2014 as the basis for this determination. The difference between the fair value of the liability component and the face value of the Convertible Notes will be amortized over the term of the Convertible Notes under the effective interest method and recorded as part of financial expenses. The residual value of $61.3 million (the conversion feature) was recorded to additional paid-in capital. In July 2015, we repurchased $1.5 million face value of our Convertible Notes at an average price of $1,088.10 per $1,000 principal amount. As a result of this transaction, we reduced the liability and equity components of the Convertible Notes by $1.3 million and $0.4 million, respectively and recorded a gain of $46,273. We also wrote off $30,880 of deferred financing fees as a result of this transaction. The carrying values of the liability component of the Convertible Notes as of December 31, 2015 and 2014, were $313.8 million and $304.0 million, respectively. We incurred $8.5 million of coupon interest and $11.1 million of non-cash accretion of our Convertible Notes during the year ended December 31, 2015. We incurred $4.3 million of coupon interest and $5.3 million of non-cash accretion of our Convertible Notes during the year ended December 31, 2014. We were in compliance with the covenants related to the Convertible Notes as of December 31, 2015. Unsecured Senior Notes Due 2017 On October 31, 2014, we issued $45.0 million aggregate principal amount of 7.50% Unsecured Senior Notes due October 15, 2017 (the “Senior Notes Due 2017”) and on November 17, 2014, we issued an additional $6.75 million aggregate principal amount of Senior Notes Due 2017 when the underwriters exercised their option to purchase additional Senior Notes Due 2017 on the same terms and conditions. The net proceeds from the issuance of the Senior Notes Due 2017 were approximately $49.9 million after deducting the underwriters’ discounts, commissions and offering expenses. All terms mentioned are defined in the indenture. The Senior Notes Due 2017 bear interest at a coupon rate of 7.50% per year, payable quarterly in arrears on the 15th day of January, April, July and October of each year, commencing on January 15, 2015. The Senior Notes Due 2017 are redeemable at our option, in whole but not in part, at any time at our option, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Senior Notes Due 2017 are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured and unsubordinated debt. The Senior Notes Due 2017 are effectively subordinated to our existing and future secured debt, to the extent of the value of the assets securing such debt, and structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. The Senior Notes Due 2017 were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and are listed on the NYSE under the symbol “SBNB.” The Senior Notes Due 2017 require us to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would occur as a result of such payment. If we undergo a change of control, holders may require us to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date. The financial covenants include: • Net borrowings shall not equal or exceed 70% of total assets. • Net worth shall always exceed $650.0 million. The outstanding balance was $51.75 million as of December 31, 2015 and December 31, 2014 and we were in compliance with the financial covenants as of those dates. Finance Lease Accounting In July 2015, we entered into an agreement with an unrelated third-party to purchase STI Lombard, an LR2 product tanker, which was, at the time, under construction at DSME for approximately $59.0 million. As part of this agreement, we agreed to make a deposit of $5.9 million and to bareboat charter-in the vessel for up to nine months, at $10,000 per day. STI 86 Lombard was delivered to us under the bareboat charter-in agreement in August 2015. We are obligated to take ownership of the vessel and pay the remaining amount of the purchase price of $53.1 million at the conclusion of the bareboat charter in April 2016 (or at any point prior, at the Company’s discretion). This agreement is being accounted for as a finance lease. As of December 31, 2015, the finance lease liability balance was $53.4 million. The future minimum lease payments required under the lease at December 31, 2015 are as follows: In thousands of U.S. dollars Total minimum lease payments - 2016 ................... Less amount representing interest .......................... Future net minimum lease payments ...................... As of December 31, 2015 54,335 (963 ) 53,372 $ The asset recorded under the finance lease is included in Vessels and drydock and consists of the following at December 31, 2015: In thousands of U.S. dollars Vessel and Drydock ....................................... Accumulated depreciation ............................. Derivative Contracts Interest Rate Swaps As of December 31, 2015 2014 $ 60,974 (910) $ 60,064 $ — — — In August 2011, we entered into six interest rate swap agreements to manage interest costs and the risk associated with changing interest rates on our 2011 Credit Facility and 2010 Revolving Credit Facility with three different banks. Pursuant to these interest rate swap contracts, we agreed to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. In March 2014, as a result of the sales of Noemi and Senatore and corresponding debt repayment, we reduced the notional amount on three interest rate swaps relating to the 2010 Revolving Credit Facility to $30.0 million from $51.0 million. As a result of the reduction, we made a repayment of $0.3 million to settle the liability outstanding as of the date of settlement, and we recognized a realized gain on derivative financial instruments of $0.02 million. The interest rate swaps relating to the 2011 Credit Facility qualified for hedge accounting during the years ended December 31, 2015, 2014 and 2013. Accordingly, changes in their fair value, which the hedge is deemed to be effective, were recognized directly in other comprehensive income or loss. Changes in their fair value for any portion deemed to be ineffective were recognized in the consolidated statement of income. The interest rate swaps relating to the 2010 Revolving Credit Facility were accounted for at fair value with any resultant gains or losses recognized in the consolidated statements of income during the years ended December 31, 2015, 2014 and 2013. In March 2015, we terminated the three interest rate swaps under our 2010 Revolving Credit Facility. As a result, we made a repayment of $0.1 million to settle the liability and recognized a realized gain of $0.1 million during the year ended December 31, 2015. Additionally, the three interest rate swaps under our 2011 Credit Facility expired in June 2015. Profit or loss sharing agreements In July 2012, we entered into a profit or loss sharing arrangement on the earnings of an LR1 product tanker that was not owned or operated by us. The agreement stipulated that 50% of the profits and losses were shared with the counterparty. The counterparty to this agreement was time chartering-in this vessel for a period of six months at $12,750 per day and this agreement expired in January 2013. In September 2012, we took delivery of an LR1 product tanker, FPMC P Eagle, on a time charter-in arrangement for one year at $12,800 per day. We also entered into a profit and loss sharing arrangement whereby 50% of the profits and losses relating to this vessel above or below the charterhire rate were shared with a third-party who neither owns nor operates FPMC P Eagle. The profit or loss agreement expired on October 2013. 87 In February 2015, we took delivery of an LR2 product tanker, Densa Crocodile, on a time charter-in arrangement for one year at $21,050 per day with an option to extend the charter for an additional year at $22,600 per day. We also entered into a profit and loss sharing agreement whereby 50% of the profits and losses relating to this vessel above or below the charterhire rate will be shared with a third-party who neither owns nor operates this vessel. These agreements were treated as derivatives, recorded at fair value with any resultant gain or loss recognized in the statements of income or loss. Changes in fair value were recorded as unrealized gains and losses on derivative financial instruments and actual earnings were recorded as realized gains or losses on derivative financial instruments, within the consolidated statement of income. The fair value of these instruments was determined by comparing published time charter rates to the charterhire rate and discounting those cash flows to their estimated present value. The following table summarizes the fair value of our derivative financial instruments as of December 31, 2015 and 2014, which are included in the consolidated balance sheets: In thousands of U.S. dollars Liabilities .............................................................................................................................. Derivative financial instrument (interest rate swap - current) ............................................... Derivative financial instrument (profit and loss agreement - current) .................................. Derivative financial instrument (profit and loss agreement - non-current) ........................... As of December 31, 2014 2015 $ $ $ — (1,175) (80) (1,255) $ (205) — — (205) Equity Issuances In February 2013, we closed on the sale 30,672,000 newly issued shares of common stock in a registered direct placement of common shares at an offering price of $7.50 per share. We received net proceeds of $222.1 million, after deducting placement agents’ discounts and offering expenses. In March 2013, we closed on the sale 29,012,000 newly issued shares of common stock in a registered direct placement of common shares at an offering price of $8.10 per share. We received net proceeds of $226.8 million, after deducting placement agents’ discounts and offering expenses. In May 2013, we closed on the sale of 36,144,578 newly issued shares of common stock in a registered direct placement of common shares at an offering price of $8.30 per share. We received net proceeds of $289.2 million, after deducting placement agents’ discounts and offering expenses. In August 2013, we closed on the sale of 20,000,000 newly issued shares of common stock in an underwritten offering of common shares at an offering price of $9.50 per share. In addition, the underwriters also fully exercised their over-allotment option to purchase 3,000,000 additional common shares at the offering price. We received aggregate net proceeds of $209.8 million after deducting underwriters’ discounts and offering expenses. In November 2013, we issued 3,611,809 common shares to unaffiliated third parties in connection with our acquisition of four MR vessel newbuilding contracts. In December 2013, we issued 3,523,271 common shares to unaffiliated third parties in connection with our acquisition of four MR vessel newbuilding contracts. In May 2015, we closed on the sale of 15,000,000 newly issued shares of common stock in an underwritten offering of common shares at an offering price of $9.30 per share. In addition, the underwriters also exercised a portion their over- allotment option to purchase 2,177,123 additional common shares at the offering price. We received aggregate net proceeds of $152.1 million after deducting underwriters’ discounts and offering expenses. Capital Expenditures Vessel Acquisitions and Dispositions Activity During the Year Ended December 31, 2014 In March 2014, we sold seven Very Large Crude Carriers, or VLCCs, under construction to an unrelated third party. As a result of the sale, we received net proceeds of $141.7 million, and recorded a gain of $51.4 million. The book value of these assets at the time of sale was $90.3 million. 88 In March and April 2014, respectively, we sold Noemi and Senatore for aggregate net proceeds of $42.5 million. As part of these sales, we repaid $22.5 million on our 2010 Revolving Credit Facility in March 2014. In April 2014, we sold STI Spirit for net proceeds of $29.5 million. As part of this sale, we repaid all amounts due under the STI Spirit Credit Facility of $21.4 million. In May 2014, we paid additional cash consideration of $4.7 million to the counterparties of the 2013 transaction to acquire four MR product tankers in exchange for 3,611,809 shares based on subsequent changes to our share price. In August 2014, we reached an agreement with an unrelated third-party to purchase an MR product tanker that was then under construction, STI St. Charles. The purchase price of the vessel was $37.1 million and we took delivery of this vessel in September 2014. In November 2014, we reached an agreement with an unrelated third-party to purchase two LR2 product tankers under construction at DHSC for approximately $60.0 million each. These vessels, STI Rose and STI Alexis, were delivered in January and February 2015, respectively. In December 2014, we reached an agreement with Scorpio Bulkers, a related party, to purchase newbuilding contracts for four LR2 product tankers to be constructed at shipyards in South Korea and options to purchase two additional LR2 newbuilding contracts. The purchase price for each of the four LR2 newbuilding contracts was $51.0 million with deliveries scheduled in each quarter of 2016. The options to acquire two additional LR2 product tankers expired unexercised in 2015. The independent members of our Board of Directors unanimously approved this transaction with Scorpio Bulkers. In December 2014, we designated STI Heritage and STI Harmony as held for sale. As part of this designation, we recorded a $3.9 million write-down to remeasure these vessels at their fair value less estimated costs to sell. Their revised aggregate carrying amount of $59.0 million was then reclassified from ‘Vessels’ to ‘Vessels Held for Sale’ on the consolidated balance sheet as of December 31, 2014. Activity During the Year Ended December 31, 2015 and through March 17, 2016 In March 2015, we sold Venice to an unrelated third-party for net proceeds of $12.6 million. As a result of this sale, we recognized a gain of $0.7 million and repaid $6.1 million on our 2010 Revolving Credit Facility. In April 2015, we sold STI Heritage and STI Harmony to an unrelated third-party for aggregate net proceeds of $60.3 million and recorded an aggregate gain of $1.3 million. This gain relates to lower than expected closing costs incurred relating to the closing of the sales of each vessel. As a result of these sales, we made an aggregate repayment of $25.6 million on our 2010 Revolving Credit Facility and wrote-off $21,465 of deferred financing fees. In May 2015, we reached agreements with two unrelated third parties to purchase an aggregate of four LR2 product tankers, which were under construction at SSME and DHSC, for $60.0 million each. STI Spiga and STI Savile Row were delivered in June 2015 and STI Kingsway and STI Carnaby were delivered in August and September 2015, respectively. In July 2015, we entered into an agreement with an unrelated third-party to purchase a 2014 built MR product tanker, STI Memphis, for approximately $37.1 million. The vessel was delivered to us in August 2015. In July 2015, we entered into an agreement with an unrelated third-party to purchase STI Lombard, an LR2 product tanker, which was, at the time, under construction at DSME, for approximately $59.0 million. As part of this agreement, we agreed to make a deposit of $5.9 million and to bareboat charter-in the vessel for up to nine months, at $10,000 per day. STI Lombard was delivered to us under the bareboat charter-in agreement in August 2015. We are obligated to take ownership of the vessel and pay the remaining amount of the purchase price of $53.1 million at the conclusion of the bareboat charter in April 2016 (or at any point prior, at the Company’s discretion). This agreement is being accounted for as a finance lease as further described in Note 11 to our Consolidated Financial Statements included herein. In July 2015, we reached an agreement with an unrelated third party to purchase an MR product tanker, STI Black Hawk that was under construction at HMD for approximately $37.0 million. The vessel was delivered to us in September 2015. In August 2015, we signed contracts with HMD to construct four MR product tankers for $35.8 million per vessel with deliveries scheduled in 2017. As part of this agreement, we received options to construct up to ten additional MR product tankers with fixed delivery dates and at fixed prices. In October 2015, we exercised four of the options received from HMD and signed agreements to construct four MR product tankers for $36.0 million each, with deliveries scheduled in the third and fourth quarters of 2017. 89 In October 2015, we sold STI Highlander to an unrelated third-party for net proceeds of $17.9 million and recorded a loss of $2.1 million. There was no debt repayment resulting from this transaction as this vessel was not collateralized under any of our credit facilities at the time of sale. In December 2015, four options to construct MR product tankers with HMD expired unexercised. As a result, we wrote-off $0.7 million for deposits made on these vessels during the year ended December 31, 2015. Agreement to Sell Five MR Product Tankers In February 2016, we reached an agreement with an unrelated third party to sell five 2014 built MR product tankers (STI Lexington, STI Powai, STI Chelsea, STI Olivia and STI Mythos) for approximately $33.3 million each. The sale of STI Lexington closed in March 2016 and the sales of the remaining four vessels are expected to close by June 2016. As a result of the closing of the sale of STI Lexington, we repaid $18.4 million on our K-Sure Credit Facility and expect to write-off $0.7 million of deferred financing fees during the first quarter of 2016. We expect to record an aggregate write-down on the sales of all five vessels of approximately $3.2 million during the first quarter of 2016 in connection with these transactions. We also expect to write-off an aggregate of approximately $2.6 million of deferred financing fees for the sales of the four vessels that have not closed as of March 17, 2016. These fees will be written-off on or around the closing date of each sale (when the corresponding debt is repaid). Newbuilding Program During the period from January 1, 2015 through March 17, 2016, we took delivery of 26 vessels under our Newbuilding Program. We currently have contracts for the construction of 12 newbuilding product tankers with various shipyards, consisting of (i) eight MR product tankers with HMD for an aggregate purchase price of $287.5 million, (ii) two LR2 product tankers with DHSC for an aggregate purchase price of $102.0 million and (iii) two LR2 product tankers with SSME for an aggregate purchase price of $102.0 million. The four LR2s are expected to be delivered to us throughout 2016 (one per quarter) and the eight MRs are expected to be delivered to us throughout 2017. As of March 17, 2016, we have made total payments in the amount of $172.6 million in cash under these shipbuilding contracts. We are obligated to pay remaining yard installments in the amount of $318.9 million before we take possession of all of these vessels. Set forth in the table below is certain information regarding the vessels we acquired under our Newbuilding Program during the period from January 1, 2015 through March 17, 2016. Name 1 STI Tribeca .......................... 2 STI Hammersmith ................ 3 STI Rotherhithe .................... 4 STI Rose............................... 5 STI Gramercy ....................... 6 STI Veneto ........................... 7 STI Alexis ............................ 8 STI Bronx ............................. 9 STI Pontiac ........................... 10 STI Manhattan ..................... 11 STI Winnie ........................... 12 STI Oxford ........................... 13 STI Queens ........................... 14 STI Osceola .......................... 15 STI Lauren ........................... 16 STI Connaught ..................... 17 STI Notting Hill ................... 18 STI Spiga ............................. 19 STI Seneca ........................... 20 STI Savile Row .................... 21 STI Westminster .................. 22 STI Brooklyn ....................... 23 STI Kingsway ...................... 24 STI Lombard ........................ 25 STI Carnaby ......................... 26 STI Black Hawk ................... Month Delivered January 2015 January 2015 January 2015 January 2015 January 2015 February 2015 February 2015 February 2015 March 2015 March 2015 March 2015 April 2015 April 2015 April 2015 May 2015 May 2015 May 2015 June 2015 June 2015 June 2015 June 2015 July 2015 August 2015 August 2015 September 2015 September 2015 90 Type MR Handymax Handymax LR2 MR LR2 LR2 MR MR MR LR2 LR2 MR MR LR2 LR2 MR LR2 MR LR2 MR MR LR2 LR2 LR2 MR (1) (1) STI Lombard was delivered in August 2015 under a bareboat charter-in agreement for up to nine months at $10,000 per day that expires in April 2016. We have the obligation to purchase the vessel for $53.1 million at the conclusion of the bareboat charter. Q1 2016 - installment payments made ................................... Q1 2016 - remaining installment payment ............................. Q2 2016 .................................................................................. Q3 2016 .................................................................................. Q4 2016 .................................................................................. Q1 2017 .................................................................................. Q2 2017 .................................................................................. Q3 2017 .................................................................................. Q4 2017 .................................................................................. In millions of U.S. dollars 56.9 $ 15.3 74.7 36.7 44.0 57.3 46.6 54.1 43.3 Total ....................................................................................... $ 428.9 Our remaining commitments under our newbuilding construction contracts as of March 17, 2016 are as follows:* * These are estimates only and are subject to change as construction progresses. Chartered-in Fleet Set forth below is certain information regarding our chartered-in fleet as of March 17, 2016. Name Year built Type Delivery (1) Charter Expiration Rate ($/ day) 1 Kraslava ........................................ 2 Krisjanis Valdemars ...................... Iver Prosperity .............................. 3 4 Miss Mariarosaria ......................... 5 Vukovar ........................................ 6 Targale .......................................... 7 Gan-Trust ...................................... 8 Hellespont Progress ...................... 9 Densa Crocodile ............................ 10 Densa Alligator ............................. 11 STI Lombard ................................. January-11 2007 Handymax 2007 Handymax February-11 2007 Handymax September-13 2011 2015 2007 2013 2006 2015 2013 2015 May-15 May-15 May-12 January-13 March-14 February-15 September-13 August-15 MR MR MR MR LR1 LR2 LR2 LR2 Time Charters That Expired Through March 17, 2016 1 USMA ........................................... 2 FPMC P Ideal ............................... 3 Fair Seas ....................................... 4 Southport....................................... 5 Jinan .............................................. 6 Nave Orion .................................... 7 FPMC P Hero ............................... 8 Histria Azure ................................. 9 SN Azzurra ................................... 10 SN Federica .................................. 11 Khawr Aladid ................................ 12 Histria Coral .................................. 13 Swarna Jayanti .............................. 14 FPMC P Eagle .............................. 15 Histria Perla .................................. 16 King Douglas ................................ MR LR2 MR LR2 LR2 LR2 2007 2012 2008 2008 2003 Handymax 2013 2011 2007 Handymax 2003 2003 2006 2006 Handymax 2010 2009 2005 Handymax 2008 LR1 LR1 LR2 LR2 LR1 LR1 December-13 January-13 January-13 January-13 April-13 March-13 April-13 April-12 December-13 February-13 August-13 July-11 March-14 September-12 July-11 August-13 May-16 May-16 April-16 May-16 May-18 May-16 January-17 March-16 February-17 September-16 May-16 January-15 January-15 March-15 February-15 April-15 April-15 May-15 June-15 June-15 September-15 August-15 October-15 October-15 October-15 November-15 January-16 14,150 14,150 13,500 15,250(2) 17,034 15,200(3) 17,500(4) 16,250(5) 22,600(6) 24,875(7) 10,000(8) 14,500 15,500 17,500 15,700 12,600 14,300 15,500 13,550 13,600 12,500 15,400 13,550 16,250 14,525 13,550 15,000 (1) Represents delivery date or estimated delivery date. 91 (2) We have an option to extend the charter for an additional year at $16,350 per day. (3) We have an option to extend the charter for an additional year at $16,200 per day. (4) In October 2015, we extended the charter for an additional year at $17,500 per day effective January 2016. We have an option to extend the charter for an additional year at $18,000 per day. (5) In February 2016, we extended the charter for an additional year at $17,250 per day effective March 2016. (6) In November 2015, we extended the charter for an additional year at $22,600 per day effective February 2016. We have entered into an agreement with a third-party whereby we split all of the vessel’s profits and losses above or below the daily base rate. (7) We have an option to extend the charter for an additional year at $26,925 per day. (8) This vessel was delivered in August 2015 under a bareboat charter-in agreement for $10,000 per day for up to nine months. We are obligated to take ownership of the vessel, and pay the remaining 90% of the contract price, at the conclusion of the bareboat charter (or at any point prior, at our discretion). In March 2016, we entered into time charter-in agreements with an unrelated third party on three ice class 1A Handymax product tankers. Each agreement is for three years at $15,600 per day and we have two consecutive one year options to extend the agreements at $16,500 per day and $17,500 per day, respectively. These time charters are expected to commence by the end of March 2016. In addition, we have the option to time charter-in up to four additional ice class 1A Handymax product tankers under the same terms. Drydock During 2014, Venice was drydocked for a cost $1.3 million and was off-hire for 26 days. During 2015, none of our vessels were drydocked. As our fleet matures and expands, our drydock expenses will likely increase. Ongoing costs for compliance with environmental regulations and society classification survey costs are a component of our vessel operating costs. We are not currently aware of any regulatory changes or environmental liabilities that we anticipate will have a material impact on our results of operations or financial condition. Dividends Our board of directors declared the following quarterly cash dividends in 2013, 2014, 2015 and through March 17, 2016: Dividends per share $0.025 $0.035 $0.07 $0.08 $0.09 $0.10 $0.12 $0.12 $0.125 $0.125 $0.125 $0.125 Date Paid June 25, 2013 September 25, 2013 December 18, 2013 March 26, 2014 June 12, 2014 September 10, 2014 December 12, 2014 March 30, 2015 June 10, 2015 September 4, 2015 December 11, 2015 March 30, 2016 * * Dividend is scheduled to be paid on March 30, 2016. The declaration and payment of dividends is subject at all times to the discretion of our board of directors. Please see “Item 8. Financial Information-A. Consolidated Statements and Other Financial Information-Dividend Policy.” 2015 Securities Repurchase Program In May 2015, our board of directors authorized a new securities repurchase program (which we refer to as our Securities Repurchase Program) to purchase up to an aggregate of $250 million of the Company’s common stock and bonds, which currently consists of our (i) Convertible Notes, (ii) Senior Notes Due 2020 (NYSE: SBNA) and (iii) Senior Notes Due 2017 (NYSE: SBNB). This program replaces our stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program. 92 During the year ended December 31, 2015, we have acquired the following: • an aggregate of 8,273,709 of our common shares that are being held as treasury shares at an average price of $9.19 per share (7,527,070 shares were purchased at an average price at $9.32 under the Securities Repurchase Program; the remaining shares were purchased in the first quarter of 2015 under the previous buyback program). • $1.5 million face value of our Convertible Notes at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the Securities Repurchase Program). From January 1, 2016 through March 17, 2016, we acquired an aggregate of 2,299,606 of our common shares that are being held as treasury shares at an average price of $5.96 per share. We had $164.5 million remaining under our Securities Repurchase Program as of March 17, 2016. We expect to repurchase these shares in the open market, at times and prices that are considered to be appropriate by us, but we are not obligated under the terms of the program to repurchase any shares. As of December 31, 2015, we had 175,335,400 shares outstanding and as of March 17, 2016, we had 173,035,794 shares outstanding. These shares provide the holders with rights to dividends and voting rights. C. Research and Development, Patents and Licenses, Etc. Not applicable. D. Trend Information See “Item 4. Information on the Company—B. Business Overview—The International Oil Tanker Shipping Industry.” E. Off-Balance Sheet Arrangements As of December 31, 2015, we were committed to make charter-hire payments to third parties for certain chartered-in vessels. These arrangements are accounted for as operating leases. Additionally, we are committed to make payments on our newbuilding vessel orders. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources” for further information. F. Tabular Disclosure of Contractual Obligations The following table sets forth our total contractual obligations at December 31, 2015: In thousands of U.S. dollars Secured bank loans(1) ........................................................ Estimated interest payments on secured bank loans(2) ...... Bank loans - commitment fees(3) ....................................... Time charter-in commitments(4) ........................................ Derivative financial instruments - profit or loss agreement(5) ................................................................... Technical management fees(6) ........................................... Commercial management fees(7) ....................................... Newbuilding installments (8) ............................................. Convertible Notes(9) .......................................................... Convertible Notes - estimated interest payments(10) .................................................................. Senior unsecured notes(11) ................................................. Senior unsecured notes - estimated interest payments(12) ................................................................... Finance lease(13) ................................................................ Less than 1 year $ 128,285 58,627 767 38,033 $ 1,200 23,063 10,312 227,571 — 8,516 — 1 to 3 years 333,740 121,261 153 9,399 83 23,000 10,284 201,281 — 17,029 51,750 3 to 5 years More than 5 years $ 658,652 80,898 — — — — — — 358,500 8,514 53,750 $ 512,433 13,455 — — — — — — — — — 7,509 54,335 $ 558,218 11,138 — 779,118 5,412 — $ 1,165,726 $ $ — — 525,888 (1) Represents principal payments due on our secured credit facilities based on our outstanding borrowings as of December 31, 2015. 93 (2) Represents estimated interest payments on our secured credit facilities. These payments were estimated by taking into consideration the margin on each credit facility and the forward curve calculated from the term structure of interest swap rates as published by the US Federal Reserve as of December 31, 2015. The forward curve was calculated as follows as of December 31, 2015: Year 1 ............................ Year 2 ............................ Year 3 ............................ Year 4 ............................ Year 5 ............................ Year 6 ............................ Year 7 ............................ 0.86% 1.46% 1.88% 2.12% 2.28% 2.41%(1) 2.64% (1) The US Federal Reserve does not publish six year swap rates. As such, we interpolated the year six forward rate using an average of the five and seven year US Federal Reserve published swap rates. The margins on each credit facility that have amounts outstanding at December 31, 2015 are as follows: Facility 2011 Credit Facility ........................................ Newbuilding Credit Facility ........................... 2013 Credit Faculty ........................................ KEXIM ........................................................... KEXIM Commercial Tranche ........................ KEXIM Guarantee Notes ............................... K-Sure ............................................................. K-Sure Commercial Tranche .......................... ING Credit Facility ......................................... ABN AMRO Credit Facility ........................... BNP Paribas Credit Facility ............................ Margin 3.50% 2.70% 3.50% 3.25% 3.25%(1) 1.70% 2.25% 3.25%(2) 1.95% 2.15% 1.95% (1) Borrowings under the KEXIM Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date. (2) Borrowings under the K-Sure Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date in respect of the Commercial Tranche. Interest was then estimated using the above mentioned rates multiplied by the amounts outstanding under our various credit facilities using the balance as of December 31, 2015 and taking into consideration the scheduled amortization of such facilities going forward until maturity. (3) As of December 31, 2015, a commitment fee equal to 40% of the applicable margin is payable on the unused daily portion of our ING Credit Facility and BNP Paribas Credit Facility and a commitment fee equal to 1% of the amounts available is payable on the unused daily portion of our Credit Suisse Credit Facility. Our 2011 Credit Facility, Newbuilding Credit Facility, 2013 Credit Facility, KEXIM Credit Facility, K-Sure Credit Facility and ABN AMRO Credit Facility were fully drawn as of December 31, 2015. (4) Represents amounts due under our time charter-in agreements as of December 31, 2015. (5) Represents estimated payments related to a profit and loss sharing arrangement whereby 50% of the profits and losses relating to Densa Crocodile, above or below the charterhire rate, are shared with a third-party that neither owns nor operates this vessel. This amount is estimated by comparing published time charter rates as of December 31, 2015 to the charterhire rate in the agreement. (6) We pay our technical manager, SSM, $685 per day per owned vessel. These fees are subject to a two year notice period under our technical management agreement which would be due and payable upon the sale of a vessel. 94 (7) We pay our commercial manager, SCM, $250 per vessel per day for LR2 vessels, $300 per vessel per day for LR1 vessels, $325 per vessel per day for MR and Handymax vessels plus a 1.50% commission on gross revenue for vessels that are in one of the Scorpio Group Pools. When the vessels are not in the pools, SCM charges fees of $250 per vessel per day for the LR1 and LR2 vessels, $300 per vessel per day for the Handymax and MR vessels plus a 1.25% commission on gross revenue. These fees are subject to a two year notice period under our commercial management agreement which would be due and payable upon the sale of a vessel (including estimated commissions). Commissions have been excluded from the above table due to the variable nature of the amounts. (8) Represents obligations under our agreements with HMD, DHSC and SSME for the construction of 12 vessels under our Newbuilding Program as of December 31, 2015. (9) Represents the principal due at maturity on our Convertible Notes as of December 31, 2015. (10) Represents estimated interest payments on our Convertible Notes. The Convertible Notes bear interest at a coupon rate of 2.375% per annum and mature in July 2019. (11) Represents the principal due at maturity on our Senior Unsecured Notes Due 2020 and our Senior Unsecured Notes Due 2017 as of December 31, 2015. (12) Represents estimated interest payments on our Senior Unsecured Notes Due 2020 and our Senior Unsecured Notes Due 2017 as of December 31, 2015. These notes bear interest at coupon rates of 6.75% and 7.50%, respectively. (13) Represents the remaining minimum lease payments under our finance lease for STI Lombard. G. Safe Harbor See “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this annual report. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Senior Management Set forth below are the names, ages and positions of our directors and executive officers as of the date of this annual report. Our board of directors is elected annually, and each director elected holds office for a three-year term or until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal or the earlier termination of his term of office. The terms of our Class I directors expire at the 2017 annual meeting of shareholders, the terms of our Class II directors expire at the 2018 annual meeting of shareholders, and the terms of our Class III directors expire at the 2016 annual meeting of shareholders. Officers are elected from time to time by vote of our board of directors and hold office until a successor is elected. The business address for each director and executive officer is the address of our principal executive office which is Scorpio Tankers Inc., 9, Boulevard Charles III, Monaco 98000. Certain of our officers participate in business activities not associated with us. As a result, they may devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to the shareholders of both us as well as shareholders of other companies which they may be affiliated, including other Scorpio Group companies. This may create conflicts of interest in matters involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in our favor. While there will be no formal requirements or guidelines for the allocation of their time between our business and the business of members of the Scorpio Group, their performance of their duties will be subject to the ongoing oversight of our board of directors. Name Emanuele A. Lauro ................................................. Robert Bugbee ........................................................ Cameron Mackey .................................................... Brian Lee ................................................................ Filippo Lauro .......................................................... Luca Forgione ......................................................... Anoushka Kachelo .................................................. Alexandre Albertini ................................................ Ademaro Lanzara .................................................... Donald C. Trauscht ................................................. Marianne Økland .................................................... Jose Tarruella .......................................................... Age Position 37 Chairman, Class I Director, and Chief Executive Officer 55 President and Class II Director 47 Chief Operating Officer and Class III Director 49 Chief Financial Officer 39 Vice President 39 General Counsel 36 Secretary 39 Class III Director 73 Class I Director 82 Class II Director 53 Class III Director 44 Class II Director 95 Effective as of March 9, 2016, Mr. Sergio Gianfranchi retired from his position as Vice President, Vessel Operations of the Company. Biographical information concerning the directors and executive officers listed above is set forth below. Emanuele A. Lauro, Chairman and Chief Executive Officer Emanuele A. Lauro, the Company’s founder, serves and has served as Chairman, and Chief Executive Officer since the closing of our initial public offering in April 2010. Mr. Lauro also co-founded and serves as Chairman and Chief Executive Officer of Scorpio Bulkers, which was formed in 2013. He joined the Scorpio group of companies, or the Scorpio Group, in 2003 and has continued to serve there in a senior management position since 2004. Under Mr. Lauro’s leadership, Scorpio Group has grown from an owner of three vessels in 2003 to become a leading operator and manager of approximately 200 vessels in 2016. Over the course of the last several years, Mr. Lauro has founded and developed all of the Scorpio Group Pools in addition to several other ventures such as Scorpio Logistics, which owns and operates specialized assets engaged in the transshipment of dry cargo commodities and invests in coastal transportation and port infrastructure developments in Asia and Africa since 2007. Mr. Lauro has a degree in international business from the European Business School, London. Mr. Lauro is the brother of the Company’s Vice President, Mr. Filippo Lauro. Robert Bugbee, President and Director Robert Bugbee serves and has served as a Director and President since the closing of our initial public offering in April 2010. He has more than 25 years of experience in the shipping industry. Mr. Bugbee also co-founded and serves as President and Director of Scorpio Bulkers. He joined the Scorpio Group in February 2009 and has continued to serve there in a senior management position. Prior to joining Scorpio Group, Mr. Bugbee was a partner at Ospraie Management LLP between 2007 and 2008, a company which advises and invests in commodities and basic industry. From 1995 to 2007, Mr. Bugbee was employed at OMI Corporation, or OMI, a NYSE-listed tanker company sold in 2007. While at OMI, Mr. Bugbee served as President from January 2002 until the sale of the company, and before that served as Executive Vice President since January 2001, Chief Operating Officer since March 2000, and Senior Vice President from August 1995 to June 1998. Prior to this, he was employed by Gotaas-Larsen Shipping Corporation since 1984. During this time he took a two year sabbatical beginning 1987 for the M.I.B. Program at the Norwegian School for Economics and Business administration in Bergen. He has a Fellowship from the International Shipbrokers Association and a B.A. (Honors) from London University. Cameron Mackey, Chief Operating Officer and Director Cameron Mackey serves and has served as Chief Operating Officer since the closing of our initial public offering in April 2010 and as a Director since May 2013. Mr. Mackey also serves as Chief Operating Officer of Scorpio Bulkers. He joined Scorpio Group in March 2009, where he continues to serve in a senior management position. Prior to joining Scorpio Group, he was an equity and commodity analyst at Ospraie Management LLC from 2007 to 2008. Prior to that, he was Senior Vice President of OMI Marine Services LLC from 2004 to 2007, where he was also in Business Development from 2002 to 2004. He has been employed in the shipping industry since 1994 and, earlier in his career, was employed in unlicensed and licensed positions in the merchant navy, primarily on tankers in the international fleet of Mobil Oil Corporation, where he held the qualification of Master Mariner. He has an M.B.A. from the Sloan School of Management at the Massachusetts Institute of Technology, a B.S. from the Massachusetts Maritime Academy and a B.A. from Princeton University. Brian Lee, Chief Financial Officer Brian Lee serves and has served as Chief Financial Officer since the closing of our initial public offering in April 2010. He joined Scorpio Group in April 2009 where he continues to serve in a senior management position. He has been employed in the shipping industry since 1998. Prior to joining Scorpio Group, he was the Controller of OMI from 2001 until the sale of the company in 2007. Mr. Lee has an M.B.A. from the University of Connecticut and has a B.S. in Business Administration from the University at Buffalo, State University of New York. Filippo Lauro, Vice President Mr. Filippo Lauro serves and has served as an executive officer of the Company with the title of Vice President since May 27, 2015. He joined Scorpio Group in 2010 and has continued to serve there in a senior management position. Prior to joining Scorpio Group, Mr. Lauro was the founder of and held senior executive roles in several private companies, both in his native Italy and abroad, primarily active in real estate, golf courses and resorts development. Mr. Lauro is the brother of the Company’s Chairman and Chief Executive Officer, Mr. Emanuele Lauro. 96 Luca Forgione, General Counsel Luca Forgione serves and has served as General Counsel since the closing of our initial public offering in April 2010 and has served as Secretary until December 2, 2013. Mr. Forgione also serves as General Counsel of Scorpio Bulkers. He joined Scorpio Group in August 2009 where he continues to serve as General Counsel. He is licensed as a lawyer in his native Italy and as a Solicitor of the Supreme Court of England & Wales. Mr. Forgione has more than ten years of shipping industry experience and has worked in the fields of shipping, offshore logistics, commodity trading and energy since the beginning of his in-house career, most recently with Constellation Energy Commodities Group Ltd. in London, and now part of Exelon (NYSE: EXC) from 2007 to 2009, and previously with Coeclerici S.p.a. in Milan from 2004 to 2007. He has experience with all aspects of the supply chain of drybulk and energy commodities (upstream and downstream), and has developed considerable understanding of the regulatory and compliance regimes surrounding the trading of physical and financial commodities as well as the owning, managing and chartering of vessels. Mr. Forgione was a Tutor in International Trade Law and Admiralty Law at University College London (U.K.) and more recently a Visiting Lecturer in International Trade Law at King’s College (U.K.). He has a Master’s Degree in Maritime Law from the University of Southampton (U.K.) and a Law Degree from the University of Genoa (Italy). Anoushka Kachelo, Secretary Anoushka Kachelo serves and has served as our Secretary since December 2, 2013. Mrs. Kachelo also serves as Secretary of Scorpio Bulkers. She joined Scorpio Group in September 2010 as Senior Legal Counsel. Mrs. Kachelo is a Solicitor of the Supreme Court of England & Wales and has worked in the fields of commodity trading, energy and asset finance. Prior to joining the Scorpio Group, Mrs. Kachelo was Legal Counsel for the Commodities Team at JPMorgan (London) and prior to that in private practice for the London office of McDermott Will & Emery and Linklaters. She has a BA in Jurisprudence from the University of Oxford (U.K.). Alexandre Albertini, Director Alexandre Albertini serves and has served on our board of directors since the closing of our initial public offering in April 2010. Mr. Albertini has more than 19 years of experience in the shipping industry. He has been employed by Marfin Management SAM, a drybulk ship management company, since 1997 and has served as its CEO since October 2010. Marfin operates nine vessels, providing services such as technical, commercial, and crew management as well as insurance, legal, financial, and information technology. He also serves as President of Ant. Topic srl, a vessel and crewing agent based in Trieste, Italy. Mr. Albertini serves on the board of a private company in addition to various trade associations; BIMCO, Monaco Chamber of Shipping, Intermanager, FEDEM and was recently appointed as a Director of The Steamship Mutual Underwriting Association (Bermuda) Limited. Ademaro Lanzara, Director Ademaro Lanzara serves and has served on our board of directors since the closing of our initial public offering in April 2010. Mr. Lanzara has served as Chairman of BPV Finance (International) Plc Dublin, a subsidiary of Banca Popolare di Vicenza, Italy, since 2008. He has also served as the deputy Chairman and Chairman of the Audit Committee of Cattolica Life Inc. Dublin since 2011, Chairman of BPVI Fondi Sgr SpA, Milano from April 2012 until November 2013 and Chairman of NEM Sgr SpA Vicenza since November 2013. From 1963 to 2006, Mr. Lanzara held a number of positions with BNL spa Rome, a leading Italian banking group, including Deputy Group CEO, acting as the Chairman of the Credit Committee and Chairman of the Finance Committee. He also served as Chairman and/or director of a number of BNL controlled banks or financial companies in Europe, the United States and South America. He formerly served as a director of each of Istituto dell’Enciclopedia Italiana fondata da Giovanni Treccani Spa, Rome, Italy, the Institute of International Finance Inc. in Washington DC, Compagnie Financiere Edmond de Rothschild Banque, in Paris, France, ABI—Italian Banking Association in Rome, Italy, FITD—Interbank deposit Protection Fund, in Rome, Italy, ICC International Chamber of Commerce Italian section, Rome, Italy and Co-Chairman Round Table of Bankers and Small and Medium Enterprises, European Commission, in Brussels, Belgium. Mr. Lanzara has an economics degree (graduated magna cum laude) from the University of Naples, a law degree from the University of Naples and completed the Program for Management Development (PMD) at Harvard Business School. Donald C. Trauscht, Director Donald C. Trauscht serves and has served on our board of directors since the closing of our initial public offering in April 2010. Mr. Trauscht has served as the Chairman of BW Capital Corporation, a private investment company, since 1996. From 1967 to 1995, Mr. Trauscht held a number of positions at Borg-Warner Corporation, including Chairman and Chief Executive Officer. While at Borg Warner, Mr. Trauscht supervised an annual capital budget of $250 million and was 97 responsible for risk assessment decisions involving the company’s investments. He has participated in acquisitions, divestments, financings, public offerings and other transactions whose combined value is over $30 billion. Mr. Trauscht is a director of Esco Technologies Inc., Hydac International Corporation and Bourns Inc. He formerly served as a director of Baker Hughes Inc., Cordant Technologies Inc., Blue Bird Corporation, Imo Industries Inc., Mannesmann Capital Corporation, Wynn International Inc., Recon Optical Inc., Global Motorsport Group Inc., OMI Corporation, IES Corporation, NSK-Warner Ltd. and Eyes for Learning LLC. He has served as the Chairman, Lead Director, and Audit Committee, Compensation Committee, and Governance Committee Chairman at numerous public and private companies. Marianne Økland, Director Marianne Økland serves and has served on our board of directors since April 2013. Ms. Økland is also a Managing Director of Avista Partners, a London based consultancy company that provides advisory services and raises capital. In addition, she is a non-executive director at each of Islandsbanki (Iceland), IDFC Limited, IDFC NOFHC and IDFC Alternatives (India). She also serves on the Audit Committees of IDFC Limited and Islandsbanki. Previously, she was a non- executive director at NLB (Slovenia). Between 1993 and 2008, Ms. Økland held various investment banking positions at JP Morgan Chase & Co. and UBS where she focused on debt capital raising and structuring. Ms. Økland has led many transactions for large Nordic banks and insurance companies, including some of the most significant mergers and acquisitions in these sectors. Between 1990 and 1993, Ms. Økland headed European operations of Marsoft, a Boston, Oslo and London based consulting firm that advises banks and large shipping, oil and raw material companies on shipping strategies and investments. Ms. Økland holds a M.Sc. degree in Finance and Economics from the Norwegian School of Economics and Business Administration where she also worked as a researcher and taught mathematics and statistics. Jose Tarruella, Director Jose Tarruella serves and has served on our board since May 2013. Mr. Tarruella is also the founder and Chairman of Camino de Esles s.l., a high-end restaurant chain with franchises throughout Madrid, Spain, since 2007. Prior to forming Camino de Esles, Mr. Tarruella was a Director in Group Tragaluz, which owns and operates restaurants throughout Spain. Mr. Tarruella also acts as a consultant for the Spanish interests of Rank Group plc (LSE: RNK.L) a leading European gaming-based entertainment business. He has been involved in corporate relations for Esade Business School in Madrid. He earned an International MBA from Esade Business School in Barcelona and an MA from the University of Navarre in Spain. B. Compensation We paid an aggregate compensation of $42.5 million, $31.0 million and $15.7 million to our senior executive officers in 2015, 2014, and 2013, respectively. Executive management remuneration was as follows during these periods: In thousands of US dollars Short-term employee benefits (salaries) ............................................................... Share-based compensation (1) ................................................................................ For the year ended December 31, 2013 2014 2015 $ 15,601 26,911 $ 42,512 7,454 23,553 $ 31,007 5,433 10,274 $ 15,707 $ $ (1) Represents the amortization of restricted stock issued under our equity incentive plans. See Note 14 to our Consolidated Financial Statements included herein for further description. Each of our non-employee directors receive cash compensation in the aggregate amount of $60,000 annually, plus an additional fee of $10,000 for each committee on which a director serves plus an additional fee of $25,000 for each committee for which a director serves as Chairman, per year, plus an additional fee of $35,000 to the lead independent director, plus $2,000 for each meeting, plus reimbursements for actual expenses incurred while acting in their capacity as a director. During the year ended December 31, 2015 and 2014, we paid an aggregate compensation of $0.8 million and $0.8 million to our directors, respectively. Our officers and directors are eligible to receive awards under our equity incentive plan which is described below under “—2010 Equity Incentive Plan and 2013 Equity Incentive Plan.” We believe that it is important to align the interests of our directors and management with that of our shareholders. In this regard, we have determined that it will generally be beneficial to us and to our shareholders for our directors and management to have a stake in our long-term performance. We expect to have a meaningful component of our compensation package for our directors and management consisted of equity interests in us in order to provide them on an on-going basis with a meaningful percentage of ownership in us. We do not have a retirement plan for our officers or directors. 98 2010 Equity Incentive Plan In 2010, we adopted an equity incentive plan, which we refer to as the 2010 Equity Incentive Plan, under which directors, officers, employees, consultants and service providers of us and our subsidiaries and affiliates were eligible to receive incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common stock. The 2010 Equity Incentive Plan is administered by our compensation committee. We reserved a total of 1,148,916 common shares for issuance under the plan. There are no shares remaining available for issuance under the 2010 Equity Incentive Plan. Under the terms of the 2010 Equity Incentive Plan, stock options and stock appreciation rights granted under the plan have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights are exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant. The restricted shares granted under the 2010 Equity Incentive Plan are subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator. Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the 2010 Equity Incentive Plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full. Our board of directors may amend or terminate the 2010 Equity Incentive Plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. Unless terminated earlier by our board of directors, the 2010 Equity Incentive Plan expires ten years from the date it was adopted. 2013 Equity Incentive Plan In April 2013, we adopted an equity incentive plan, which was amended in March 2014 and which we refer to as the 2013 Equity Incentive Plan, under which directors, officers, employees, consultants and service providers of us and our subsidiaries and affiliates are eligible to receive incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common stock. We initially reserved a total of 5,000,000 common shares for issuance under the plan which was subsequently revised as follows: • • • In October 2013, we reserved an additional 6,376,044 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. In September 2014, we reserved an additional 1,088,131 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. In May 2015, we reserved an additional 1,755,443 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. Under the terms of the plan, stock options and stock appreciation rights granted under the plan will have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights will be exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant. The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator. Following the vesting of a restricted stock unit, the award recipient will be paid an amount equal to the number of vested restricted stock units multiplied by the fair market value of a common share on the date of vesting, which payment may be paid in the form of cash or common shares or a combination of both, as determined by the plan administrator. The plan administrator may grant dividend equivalents with respect to grants of restricted stock units. Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full. 99 Our board of directors may amend or terminate the plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. Unless terminated earlier by our board of directors, the plan will expire ten years from the date the plan is adopted. In the second quarter of 2013, we issued 4,610,000 shares of restricted stock to our employees and 390,000 shares to our independent directors for no cash consideration. The weighted average share price on the issuance dates was $8.69 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vested on March 10, 2016, (ii) one-third of the shares vest on March 10, 2017, and (iii) one-third of the shares vest on March 10, 2018. The vesting schedule of the restricted stock to our independent directors is (i) one-third of the shares vested on March 10, 2014, (ii) one- third of the shares vested on March 10, 2015, and (iii) one-third of the shares vested on March 10, 2016. In October 2013, we issued 3,749,998 shares of restricted stock to our employees and 250,000 shares to our independent directors for no cash consideration. The weighted average share price on the issuance date was $9.85 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on October 11, 2016, (ii) one- third of the shares vest on October 11, 2017, and (iii) one-third of the shares vest on October 11, 2018. The vesting schedule of the restricted stock to our independent directors is (i) one-half of the shares vested on October 11, 2014 and (ii) one-half of the shares vested on October 11, 2015. In February 2014, we issued 2,011,000 shares of restricted stock to our employees and 145,045 shares to our independent directors for no cash consideration. The weighted average share price on the issuance date was $9.30 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on February 21, 2017, (ii) one- third of the shares vest on February 21, 2018, and (iii) one-third of the shares vest on February 21, 2019. The vesting schedule of the restricted stock to our independent directors is (i) one-third of the shares vested on February 21, 2015, (ii) one-third of the shares vested on February 21, 2016, and (iii) one-third of the shares vest on February 21, 2017. In May and September 2014, we issued 213,000 and 5,000 shares of restricted stock to SSH employees, respectively, for no cash consideration. The share prices on the issuance dates were $8.89 per share and $9.13 per share, respectively. The vesting schedule of the restricted stock to SSH employees is (i) one-third of the shares vest on February 21, 2017, (ii) one-third of the shares vest on February 21, 2018, and (iii) one-third of the shares vest on February 21, 2019. In November 2014, we issued 938,131 shares of restricted stock to our employees and 50,000 shares to our independent directors for no cash consideration. The share price on the issuance date was $8.57 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on November 18, 2017, (ii) one-third of the shares vest on November 18, 2018, and (iii) one-third of the shares vest on November 18, 2019. The restricted shares issued to our independent directors vested on November 18, 2015. In July 2015, we issued 1,466,944 shares of restricted stock to our employees, 100,000 shares to our independent directors and 290,500 to SSH employees for no cash consideration. The share price on the issuance date was $10.32 per share. The vesting schedule of the restricted stock issued to our employees and SSH employees is (i) one-third of the shares vest on June 4, 2018, (ii) one-third of the shares vest on June 4, 2019, and (iii) one-third of the shares vest on June 4, 2020. The restricted shares issued to our directors vest on June 4, 2016. No shares remain eligible for issuance under the plan as of March 17, 2016. Employment Agreements We have entered into employment agreements with the majority of our executives. These employment agreements remain in effect until terminated in accordance with their terms upon not less than between 24 months and 36 months prior written notice, depending on the terms of the employment agreement applicable to each executive. Pursuant to the terms of their respective employment agreements, our executives are prohibited from disclosing or unlawfully using any of our material confidential information. Upon a change in control of us, the annual bonus provided under the employment agreement becomes a fixed bonus of between 150% and 250% of the executive’s base salary and the executive may receive an assurance bonus equal to the fixed bonus, depending on the terms of the employment agreement applicable to each executive. Any such executive may be entitled to receive upon termination an assurance bonus equal to such fixed bonus and an immediate lump-sum payment in an amount equal to three times the sum of the executive’s then current base salary and the assurance bonus, and he will continue to receive all salary, compensation payment and benefits, including additional 100 bonus payments, otherwise due to him, to the extent permitted by applicable law, for the remaining balance of his then- existing employment period. If an executive’s employment is terminated for cause or voluntarily by the employee, he shall not be entitled to any salary, benefits or reimbursements beyond those accrued through the date of his termination, unless he voluntarily terminated his employment in connection with certain conditions. Those conditions include a change in control combined with a significant geographic relocation of his office, a material diminution of his duties and responsibilities, and other conditions identified in the employment agreement. C. Board Practices Our board of directors currently consists of eight directors, five of whom have been determined by our board of directors to be independent under the rules of the NYSE and the rules and regulations of the SEC. Our board of directors has an Audit Committee, a Nominating and Corporate Governance Committee, a Compensation Committee and a Regulatory and Compliance Committee, each of which is comprised of certain of our independent directors, who are Messrs. Alexandre Albertini, Ademaro Lanzara, Donald Trauscht, Jose Tarruella and Mrs. Marianne Økland. The Audit Committee, among other things, reviews our external financial reporting, engages our external auditors and oversees our internal audit activities, procedures and the adequacy of our internal controls. In addition, provided that no member of the Audit Committee has a material interest in such transaction, the Audit Committee is responsible for reviewing transactions that we may enter into in the future with other members of the Scorpio Group that our board believes may present potential conflicts of interests between us and the Scorpio Group. The Nominating and Corporate Governance Committee is responsible for recommending to the board of directors nominees for director and directors for appointment to board committees and advising the board with regard to corporate governance practices. The Compensation Committee oversees our equity incentive plan and recommends director and senior employee compensation. The Regulatory and Compliance Committee oversees our operations to minimize the environmental impact by constant monitoring and measuring progresses of our vessels. Our shareholders may also nominate directors in accordance with procedures set forth in our bylaws. D. Employees As of December 31, 2015 and 2014 we had 17 and 14 employees, respectively. These employees hold executive or administrative positions in Monaco and New York. SSM and SCM were responsible for our commercial and technical management. E. Share Ownership The following table sets forth information regarding the share ownership of our common stock as of March 17, 2016 by our directors and officers, including the restricted shares issued to our executive officers and to our independent directors as well as shares purchased in the open market. Name Emanuele A. Lauro (1) ...................................................................................... Robert Bugbee (2) ............................................................................................. Cameron Mackey (3) ......................................................................................... Brian M. Lee (4) ................................................................................................ All other officers and directors individually .................................................... No. of Shares 3,747,223 3,398,734 2,468,289 1,873,142 * % Owned (5) 2.17% 1.96% 1.43% 1.08% * (1) Includes 2,987,791 shares of restricted stock from the 2010 Equity Incentive Plan and the 2013 Equity Incentive Plan. (2) Includes 2,987,791 shares of restricted stock from the 2010 Equity Incentive Plan and the 2013 Equity Incentive Plan. (3) Includes 2,026,249 shares of restricted stock from the 2010 Equity Incentive Plan and the 2013 Equity Incentive Plan. (4) Includes 1,486,691 shares of restricted stock from the 2010 Equity Incentive Plan and the 2013 Equity Incentive Plan. (5) Based on 173,035,794 common shares outstanding as of March 17, 2016. * The remaining officers and directors individually each own less than 1% of our outstanding shares of common stock. 101 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. A. Major shareholders. The following table sets forth information regarding beneficial ownership of our common stock for owners of more than five percent of our common stock, of which we are aware as of March 17, 2016. Name Wellington Management Group LLP* ..................................................................... Dimensional Fund Advisors LP* ............................................................................. Putnam Investments LLC** ...................................................................................... No. of Shares 15,885,311(1) 12,945,705(2) 10,362,065(3) % Owned (4) 9.2% 7.5% 6.0% (1) This information is derived from Schedule 13G/A filed with the SEC on February 11, 2016. (2) This information is derived from Schedule 13G filed with the SEC on February 9, 2016. (3) This information is derived from Schedule 13G filed with the SEC on February 16, 2016. (4) Based on 173,035,794 common shares outstanding as of March 17, 2016. *Includes certain funds managed thereby. **On behalf of itself and certain investment advisers and funds. As of March 15, 2016, we had 63 shareholders of record, 18 of which were located in the United States and held an aggregate of 167,526,441 shares of our common stock, representing 96.8% of our outstanding shares of common stock. However, one of the U.S. shareholders of record is Cede & Co., a nominee of The Depository Trust Company, which held 159,149,659 shares of our common stock, as of March 15, 2016. B. Related Party Transactions Management of Our Fleet Commercial and Technical Management Our vessels are commercially managed by SCM and technically managed by SSM pursuant to a Master Agreement (which may be terminated upon a two year notice). SCM and SSM are related parties of ours. We expect that additional vessels that we may acquire in the future will also be managed under the Master Agreement or on substantially similar terms. SCM’s services include securing employment, in the spot market and on time charters, for our vessels. SCM also manages the Scorpio Group Pools. When our vessels are in the Pools, SCM, the pool manager, charges fees of $300 per vessel per day with respect to our Panamax/LR1 vessels, $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus 1.50% commission on gross revenues per charter fixture. These are the same fees that SCM charges other vessels in these pools, including third-party owned vessels. For commercial management of our vessels that do not operate in any of the Scorpio Group Pools, we pay SCM a fee of $250 per vessel per day for each Panamax, LR1 and LR2 vessel and $300 per vessel per day for each Handymax and MR vessel, plus 1.25% commission on gross revenues per charter fixture. SSM’s services include day-to-day vessel operation, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. We currently pay SSM $685 per vessel per day to provide technical management services for each of our vessels. This fee is based on contracted rates that were the same as those charged to other, third party vessels managed by SSM at the time the management agreements were entered into. In 2015, we paid a $0.5 million termination fee due under the vessel’s commercial management fee agreement with SCM and $0.5 million termination fee due under the vessel’s technical management fee agreement with SSM as a result of the sale of STI Highlander. Administrative Services Agreement We have an Administrative Services Agreement with SSH or our Administrator, for the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. SSH is a related party of ours. We reimburse our current Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. The services provided to us by our Administrator may be sub-contracted to other entities within the Scorpio Group. 102 We also pay our Administrator a fee for arranging vessel purchases and sales for us, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. For the year ended December 31, 2015, we paid our Administrator $12.6 million in connection with our purchase and taking delivery of 29 vessels and our sale of four vessels. For the year ended December 31, 2014, we paid SSH $26.1 million in aggregate for arranging vessel sales and purchases, which consisted of $11.7 million related to the purchase and delivery of 33 newbuilding vessels, $14.0 million relating to the purchase and sale of our seven VLCCs under construction, and $0.4 million relating to the sales of Noemi and Senatore. We believe this 1% fee on purchases and sales is customary in the tanker industry. Further, pursuant to our Administrative Services Agreement, our Administrator, on behalf of itself and other members of the Scorpio Group, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt. Our Administrative Services Agreement, the effective commencement of which began in December 2009, can be terminated upon two years notice. Tanker pools To increase vessel utilization and thereby revenues, we participate in commercial pools with other shipowners of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. The managers of the pools negotiate charters with customers primarily in the spot market. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and COAs, thus generating higher effective TCE revenues than otherwise might be obtainable in the spot market while providing a higher level of service offerings to customers. When we employ a vessel in the spot charter market, we generally place such vessel in a tanker pool managed by our commercial manager that pertains to that vessel’s size class. The earnings allocated to vessels (charterhire expense for the pool) are aggregated and divided on the basis of a weighted scale, or Pool Points, which reflect comparative voyage results on hypothetical benchmark routes. The Pool Point system generally favors those vessels with greater cargo-carrying capacity and those with better fuel consumption. Pool Points are also awarded to vessels capable of carrying clean products and to vessels capable of trading in certain ice conditions. We currently participate in four pools: the Scorpio LR2 Pool, the Scorpio Panamax Tanker Pool, Scorpio MR Pool and the Scorpio Handymax Tanker Pool. SCM is responsible for the commercial management of participating vessels in the pools, including the marketing, chartering, operating and bunker (fuel oil) purchases of the vessels. The Scorpio LR2 Pool is administered by Scorpio LR2 Pool Ltd., the Scorpio Panamax Tanker Pool is administered by Scorpio Panamax Tanker Pool Ltd., the Scorpio MR Pool is administered by Scorpio MR Pool Ltd. and the Scorpio Handymax Tanker Pool is administered by Scorpio Handymax Tanker Pool Ltd. Our founder, Chairman and Chief Executive Officer and Vice President are members of the Lolli-Ghetti family which owns all issued and outstanding stock of Scorpio LR2 Pool Ltd., Scorpio Panamax Tanker Pool Ltd., Scorpio MR Pool Ltd., and Scorpio Handymax Tanker Pool Ltd., or the Pool Entities. Taking into account the recommendations of a pool committee and a technical committee, each of which is comprised of representatives of each pool participant, the Pool Entities set the respective pool policies and issue directives to the pool participants and SCM. The pool participants remain responsible for all other costs including the financing, insurance, manning and technical management of their vessels. The earnings of all of the vessels are aggregated and divided according to the relative performance capabilities of the vessel and the actual earning days for which each vessel is available. Our Relationship with the Scorpio Group and its Affiliates The Scorpio Group is owned and controlled by the Lolli-Ghetti family, of which Messrs. Emanuele Lauro and Filippo Lauro are members. We are not affiliated with any other entities in the shipping industry other than those that are members of the Scorpio Group. In addition, Mr. Emanuele Lauro, Mr. Bugbee and other members of our senior management have a minority equity interest in SSH, our Administrator, a member of the Scorpio Group. SCM and SSM, our commercial manager and technical manager, respectively, are also members of the Scorpio Group. For information regarding the details regarding our relationship with SCM, SSM and SSH, please see “– Management of our Fleet.” 103 Our board of directors consists of eight individuals, five of whom are independent directors. Three of the independent directors form the board’s Audit Committee and, pursuant to the Audit Committee charter, are required to review all potential conflicts of interest between us and related parties, including the Scorpio Group. Our three non- independent directors and all of our executive officers serve in senior management positions in certain other companies within the Scorpio Group. Transactions with Related Parties Transactions with entities controlled by the Lolli-Ghetti family (herein referred to as related party affiliates) in the consolidated statements of income and balance sheet are as follows: In thousands of U.S. dollars Pool revenue(1) Scorpio MR Pool Limited .................................................................................... Scorpio Handymax Tanker Pool Limited ............................................................ Scorpio Panamax Tanker Pool Limited ............................................................... Scorpio LR2 Pool Limited ................................................................................... Vessel operating costs(2) ....................................................................................... Commissions(3) .................................................................................................... Administrative expenses(4) ................................................................................... For the year ended December 31, 2013 2014 2015 $ 315,925 138,736 34,613 208,132 (18,393) (746) (9,331) $ 112,826 54,052 46,925 67,054 (7,947) (771) (4,823) $ 89,597 36,199 36,018 28,203 (3,703) (218) (1,944) (1) These transactions relate to revenue earned in the Scorpio Group Pools. The Scorpio Group Pools are related party affiliates. (2) These transactions represent technical management fees charged by SSM, a related party affiliate, which are included in vessel operating costs in the consolidated statement of income. We believe our technical management fees are at arms-length rates as they were based on contracted rates that were the same as those charged to other vessels managed by SSM at the time the management agreements were entered into. In June 2013, this fee was increased to $685 per vessel per day from $548 per vessel per day for technical management. (3) These transactions represent the expense due to SCM, a related party affiliate, for commissions related to the commercial management services provided by SCM under the Commercial Management Agreement (see description below). Each vessel pays a commission of 1.25% of their gross revenue when not in the Scorpio Group Pools. These expenses are included in voyage expenses in the consolidated statement of income. When our vessels are in the pools, SCM, the pool manager, charges fees of $300 per vessel per day with respect to our Panamax/LR1 vessels, $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus 1.50% commission on gross revenues per charter fixture. These are the same fees that SCM charges other vessels in these pools, including third-party owned vessels. (4) We have an Administrative Services Agreement with Scorpio Services Holding Limited, or SSH, for the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. SSH is a related party to us. We reimburse SSH for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. SSH also arranges vessel sales and purchases for us. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio Group. Additionally, our Commercial Management Agreement with SCM includes a daily flat fee charged by SCM for the vessels that are not in one of the pools managed by SCM. The flat fee is $250 per day for Panamaxes/LR1 and LR2 vessels and $300 per day for Handymax and MR vessels. • The expense for the year ended December 31, 2015 of $9.3 million included (i) the flat fee of $1.4 million charged by SCM, which was included in voyage expenses on the consolidated statement of income, (ii) administrative fees of $6.8 million charged by SSH which was included in general and administrative expenses in the consolidated statement of income, (iii) restricted stock amortization of $0.9 million, which relates to the issuance of an aggregate 508,500 shares of restricted stock to SSH employees for no cash consideration in May 2014, September 2014 and July 2015 (see Note 14 for further description of these issuances and their vesting conditions in the consolidated statement of income) and (iv) reimbursement expenses of $0.2 million that were included in general and administrative expenses in the consolidated statement of income. 104 • The expense for the year ended December 31, 2014 of $4.8 million included (i) the flat fee of $1.3 million charged by SCM, which was included in voyage expenses in the consolidated statement of income, (ii) administrative fees of $3.1 million charged by SSH, which was included in general and administrative expenses in the consolidated statement of income, (iii) restricted stock amortization of $0.3 million, which relates to the issuance of an aggregate 218,000 shares of restricted stock to SSH employees for no cash consideration in May and September 2014, and was included in general and administrative expenses in the consolidated statement of income, and (iv) the reimbursement of expenses of $0.1 million which were included in general and administrative expenses in the consolidated statement of income. • The expense for the year ended December 31, 2013 of $1.9 million included (i) the flat fee of $0.3 million charged by SCM which was included in voyage expenses in the consolidated statement of income, and (ii) administrative fees of $1.6 million charged by SSH which was included in general and administrative expenses in the consolidated statement of income. We had the following balances with related parties, which have been included in the consolidated balance sheets: In thousands of U.S. dollars Assets: Accounts receivable (due from the Scorpio Group Pools) (1) ................................................................................... Accounts receivable (SSM) ........................................................................................................ Accounts receivable (SCM) ........................................................................................................ Other assets (pool working capital contributions) (2) .................................................................. Liabilities: Accounts payable and accrued expenses (owed to the Scorpio Group Pools) ............................ Accounts payable and accrued expenses (SSM) ......................................................................... Accounts payable and accrued expenses (SCM) ........................................................................ Accounts payable and accrued expenses (SSH) (3) ..................................................................... Deposit from Scorpio Bulkers Inc. (4) ........................................................................................ As of December 31, 2015 2014 $ 59,475 2,348 — 19,256 $ 74,125 121 1 4,115 610 484 175 77 — 3,894 276 774 3,160 31,277 (1) Amounts include $8.6 million and $5.6 million of working capital contributions made on behalf of our vessels to the Scorpio Group Pools as of December 31, 2015 and 2014, respectively. Upon entrance into such pools, all vessels are required to make working capital contributions of both cash and bunkers. These amounts are accounted for and repaid as follows: • For vessels in the Scorpio Handymax Tanker Pool, the contribution amount is repaid, without interest, upon a vessel’s exit from each pool no later than six months after the exit date. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. • For vessels in the Scorpio MR Pool and Scorpio Panamax Tanker Pool, the contribution amount is repaid, without interest, when such vessel has earned sufficient net revenues to cover the value of such working capital initially deposited. Accordingly, we classify such amounts as current (within accounts receivable). • For vessels in the Scorpio LR2 Pool, the contribution amount is repaid, without interest, upon a vessel’s exit from each pool. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. (2) Represents the non-current portion of working capital receivables as described above. (3) At December 31, 2014, this amount relates to commissions payable to SSH relating to the deliveries of eight vessels. (4) In December 2014, we agreed to purchase four LR2 product tankers from Scorpio Bulkers Inc., a related party, and received an option to purchase two additional LR2 product tankers. Pursuant to this agreement, we received $31.3 million as a security deposit for the scheduled installments on these vessels that were expected to occur prior to the closing date of the sale. This amount was reimbursed to Scorpio Bulkers Inc. in July 2015 upon the closing of the transaction to purchase four LR2 product tankers. The option to purchase two additional LR2 product tankers expired unexercised in May 2015. 105 The Administrative Services Agreement with SSH includes a fee for arranging vessel purchases and sales, on our behalf, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. These fees are capitalized as part of the carrying value of the related vessel for a vessel purchase and are included as part of the gain or loss on sale for a vessel disposal. • During the year ended December 31, 2015, we paid SSH an aggregate fee of $12.6 million in connection with our purchase and taking delivery of 29 vessels and our sale of four vessels. Additionally, as a result of the sale of STI Highlander in 2015, we paid a $0.5 million termination fee due under the vessel’s commercial management fee agreement with SCM and $0.5 million termination fee due under the vessel’s technical management fee agreement with SSM. • During the year ended December 31, 2014, we paid SSH an aggregate fee of $26.1 million, which consisted of $11.7 million related to the purchase and delivery of 33 newbuilding vessels, $14.0 million relating to the purchase and sale of our seven VLCCs under construction, and $0.4 million relating to the sales of Noemi and Senatore. • During the year ended December 31, 2013, we paid SSH an aggregate fee of $9.1 million, which consisted of $2.5 million related to the purchase and delivery of seven newbuilding vessels in 2013 and $6.6 million on the purchase and subsequent sale of our VLGC business to Dorian in November 2013. In 2011, we also entered into an agreement to reimburse costs to SSM as part of its supervision agreement for newbuilding vessels. During the years ended December 31, 2014 and 2013, we were charged $0.02 million, and $0.2 million, respectively, under this agreement. There was no payment in 2015. C. INTERESTS OF EXPERTS AND COUNSEL Not applicable. ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and Other Financial Information See “Item 18. Financial Statements.” Legal Proceedings To our knowledge, we are not currently a party to any lawsuit that, if adversely determined, would have a material adverse effect on our financial position, results of operations or liquidity. As such, we do not believe that pending legal proceedings, taken as a whole, should have any significant impact on our financial statements. From time to time in the future we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. While we expect that these claims would be covered by our existing insurance policies, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had, a significant effect on our financial position, results of operations or liquidity, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position, results of operations or liquidity. Dividend Policy The declaration and payment of dividends is subject at all times to the discretion of our board of directors. The timing and amount of dividends, if any, depends on, among other things, our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors. We are a holding company with no material assets other than the equity interests in our wholly-owned subsidiaries. As a result, our ability to pay dividends, if any, depends on our subsidiaries and their ability to distribute funds to us. Our credit facilities have restrictions on our ability, and the ability of certain of our subsidiaries, to pay dividends in the event of a default or breach of covenants under the credit facility agreement. Under such circumstances, we or our subsidiaries may not be able to pay dividends so long as we are in default or have breached certain covenants of the credit facility without our lender’s consent or waiver of the default or breach. In addition, Marshall Islands law generally prohibits the payment of dividends (i) other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or (ii) when a company is insolvent or (iii) if the payment of the dividend would render the company insolvent. In addition, we may incur expenses or liabilities, including extraordinary expenses, decreases in revenues, including as a result of unanticipated off-hire days or loss of a vessel, or increased cash needs that could reduce or eliminate the amount of cash that we have available for distribution as dividends. 106 Any dividends paid by us will be income to a United States shareholder. Please see “Item 10. Additional Information - E. Taxation” for additional information relating to the United States federal income tax treatment of our dividend payments, if any are declared in the future. During the period from our initial public offering in April 2010 through April 2013, we did not declare or pay any dividends to our shareholders. For the years ended December 31, 2015, 2014 and 2013, we paid aggregate dividends to our shareholders in the amount of $87.1 million, $70.5 million and $24.4 million, respectively. We have paid the following dividends per share in respect of the periods set forth below: Date Paid June 25, 2013 ............................................. September 25, 2013 ................................... December 18, 2013 .................................... March 26, 2014 .......................................... June 12, 2014 ............................................. September 10, 2014 ................................... December 12, 2014 .................................... March 30, 2015 .......................................... June 10, 2015 ............................................. September 4, 2015 ..................................... December 11, 2015 .................................... Dividends per Share 0.025 $ 0.035 $ 0.070 $ 0.080 $ 0.090 $ 0.100 $ 0.120 $ 0.120 $ 0.125 $ 0.125 $ 0.125 $ B. Significant Changes There have been no significant changes since the date of the annual consolidated financial statements included in this report, other than as described in Note 23-Subsequent Events to our consolidated financial statements included herein. ITEM 9. OFFER AND THE LISTING A. Offer and Listing Details Since our initial public offering, our shares of common stock have traded on the NYSE under the symbol “STNG”. The high and low market prices for our shares of common stock on the NYSE are presented for the periods listed below: For the Year Ended December 31, 2011 .................................................................................................................. December 31, 2012 .................................................................................................................. December 31, 2013 .................................................................................................................. December 31, 2014 .................................................................................................................. December 31, 2015 .................................................................................................................. For the Quarter Ended: March 31, 2014 ........................................................................................................................ June 30, 2014 ........................................................................................................................... September 30, 2014 ................................................................................................................. December 31, 2014 .................................................................................................................. March 31, 2015 ........................................................................................................................ June 30, 2015 ........................................................................................................................... September 30, 2015 ................................................................................................................. December 31, 2015 .................................................................................................................. March 31, 2016 (through and including March 17, 2016) ....................................................... Most Recent Six Months: September 2015 ....................................................................................................................... October 2015 ........................................................................................................................... November 2015 ....................................................................................................................... December 2015 ........................................................................................................................ January 2016 ............................................................................................................................ February 2016 .......................................................................................................................... March 2016 (through and including March 17, 2016) ............................................................. $ $ $ High Low $ 12.18 7.50 12.48 11.91 11.64 4.28 4.93 6.92 6.48 7.50 High Low $ 11.91 10.21 10.19 9.09 9.64 10.51 11.64 10.33 7.99 9.01 8.57 8.21 6.48 7.64 8.92 8.34 7.50 4.66 High Low $ 10.07 10.33 9.49 9.13 7.99 6.60 6.43 8.83 9.01 8.35 7.50 5.26 4.66 5.45 107 B. Plan of Distribution Not applicable C. Markets Our common shares are listed for trading on the NYSE under the symbol “STNG.” In addition, our Senior Notes Due 2020 are listed for trading on the NYSE under the symbol “SBNA”, and our Senior Notes Due 2017 are listed for trading on the NYSE under the symbol “SBNB.” D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. ITEM 10. ADDITIONAL INFORMATION A. Share Capital Not applicable. B. Memorandum and Articles of Association Our amended and restated articles of incorporation have been filed as Exhibit 3.1 to Amendment No. 2 to our Registration Statement on Form F-1 (Registration No. 333-164940), filed with the SEC on March 18, 2010. Our amended and restated bylaws are filed as Exhibit 1.2 to our Annual Report on Form 20-F filed with the SEC on June 29, 2010. The information contained in these exhibits is incorporated by reference herein. In May 2014, our shareholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our authorized common stock to 400,000,000 from 250,000,000. Accordingly, we currently have 425,000,000 registered shares of which 400,000,000 are designated as common shares with a par value of $0.01 and 25,000,000 are designated as preferred shares with a par value of $0.01. Below is a summary of the description of our capital stock, including the rights, preferences and restrictions attaching to each class of stock. Because the following is a summary, it does not contain all information that you may find useful. For more complete information, you should read our amended and restated articles of incorporation and amended and restated bylaws, which are incorporated by reference herein. Purpose Our purpose, as stated in our amended and restated articles of incorporation, is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the BCA. Our amended and restated articles of incorporation and amended and restated bylaws do not impose any limitations on the ownership rights of our shareholders. Authorized capitalization Under our amended and restated articles of incorporation our authorized capital stock consists of 400,000,000 common shares, par value $0.01 per share, of which 173,035,794 shares were issued and outstanding as of March 17, 2016, and 25,000,000 preferred shares, par value $0.01 per share, of which no shares are issued and outstanding. Description of Common Shares Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, holders of our common shares are entitled to receive ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of our common 108 shares are entitled to receive pro rata our remaining assets available for distribution. Holders of our common shares do not have conversion, redemption or pre-emptive rights to subscribe to any of our securities. The rights, preferences and privileges of holders of our common shares are subject to the rights of the holders of any preferred shares, which we may issue in the future. Description of Preferred Shares Our amended and restated articles of incorporation authorize our board of directors to establish one or more series of preferred stock and to determine, with respect to any series of preferred stock, the terms and rights of that series, including the designation of the series, the number of shares of the series, the preferences and relative, participating, option or other special rights, if any, and any qualifications, limitations or restrictions of such series, and the voting rights, if any, of the holders of the series. Directors Our directors are elected by a plurality of the votes cast by shareholders entitled to vote. There is no provision for cumulative voting. Our amended and restated articles of incorporation require our board of directors to consist of at least one member. Our board of directors consists of eight members. Our amended and restated bylaws may be amended by the vote of a majority of our entire board of directors. Directors are elected annually on a staggered basis, and each shall serve for a three year term and until his successor shall have been duly elected and qualified, except in the event of his death, resignation, removal, or the earlier termination of his term of office. Our board of directors, as advised by our Compensation Committee, has the authority to fix the amounts which shall be payable to the members of the board of directors for attendance at any meeting or for services rendered to us. Shareholder Meetings Under our amended and restated bylaws, annual meetings of shareholders will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Republic of the Marshall Islands. Special meetings may be called at any time by a majority of our board of directors, the chairman of our board of directors or an officer of the Company who is also a director. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the shareholders that will be eligible to receive notice and vote at the meeting. One or more shareholders representing at least one-third of the total voting rights of our total issued and outstanding shares present in person or by proxy at a shareholder meeting shall constitute a quorum for the purposes of the meeting. Dissenters’ Rights of Appraisal and Payment Under the BCA, our shareholders have the right to dissent from various corporate actions, and receive payment of the fair market value of their shares. In the event of any further amendment of our amended and restated articles of incorporation, a shareholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting shareholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting shareholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Republic of the Marshall Islands or in any appropriate court in any jurisdiction in which our shares are primarily traded on a local or national securities exchange. Shareholders’ Derivative Actions Under the BCA, any of our shareholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the shareholder bringing the action is a holder of common shares both at the time the derivative action is commenced and at the time of the transaction to which the action relates. Limitations on Liability and Indemnification of Officers and Directors The BCA authorizes corporations to limit or eliminate the personal liability of directors to corporations and their shareholders for monetary damages for certain breaches of directors’ fiduciary duties. Our amended and restated bylaws include a provision that eliminates the personal liability of directors for actions taken as a director to the fullest extent permitted by law. 109 Our amended and restated bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by law. We are also expressly authorized to advance certain expenses (including attorney’s fees and disbursements and court costs) to our directors and officers and carry directors’ and officers’ insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and this insurance are useful to attract and retain qualified directors and executive officers. The limitation of liability and indemnification provisions in our amended and restated bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our shareholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought. Anti-Takeover Effect of Certain Provisions of our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws Several provisions of our amended and restated articles of incorporation and amended and restated bylaws, which are summarized below, may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (i) the merger or acquisition of us by means of a tender offer, a proxy contest or otherwise that a shareholder may consider in its best interest and (ii) the removal of incumbent officers and directors. Blank Check Preferred Stock Under the terms of our amended and restated articles of incorporation, our board of directors has authority, without any further vote or action by our shareholders, to issue up to 25 million shares of blank check preferred stock. Our board of directors may issue preferred shares on terms calculated to discourage, delay or prevent a change of control of us or the removal of our management. Election and Removal of Directors Our amended and restated articles of incorporation prohibit cumulative voting in the election of directors. Our amended and restated bylaws require parties other than the board of directors to give advance written notice of nominations for the election of directors. Our amended and restated articles of incorporation also provide that our directors may be removed for cause upon the affirmative vote of not less than two-thirds of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors. Limited Actions by Shareholders Our amended and restated articles of incorporation and our amended and restated bylaws provide that any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or by the unanimous written consent of our shareholders. Our amended and restated bylaws provide that, unless otherwise prescribed by law, only a majority of our board of directors, the chairman of our board of directors or an officer of the Company who is also a director may call special meetings of our shareholders and the business transacted at the special meeting is limited to the purposes stated in the notice. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our board of directors and shareholder consideration of a proposal may be delayed until the next annual meeting. Advance notice requirements for shareholder proposals and director nominations Our amended and restated bylaws provide that shareholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of shareholders must provide timely notice of their proposal in writing to the 110 corporate secretary. Generally, to be timely, a shareholder’s notice must be received at our principal executive offices not less than 150 days nor more than 180 days prior to the one year anniversary of the immediately preceding annual meeting of shareholders. Our amended and restated bylaws also specify requirements as to the form and content of a shareholder’s notice. These provisions may impede shareholders’ ability to bring matters before an annual meeting of shareholders or make nominations for directors at an annual meeting of shareholders. Classified board of directors As described above, our amended and restated articles of incorporation provide for the division of our board of directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms. Accordingly, approximately one-third of our board of directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of us. It could also delay shareholders who do not agree with the policies of our board of directors from removing a majority of our board of directors for two years. Business combinations Although the BCA does not contain specific provisions regarding “business combinations” between companies organized under the laws of the Marshall Islands and “interested shareholders,” we have included these provisions in our amended and restated articles of incorporation. Specifically, our amended and restated articles of incorporation prohibit us from engaging in a “business combination” with certain persons for three years following the date the person becomes an interested shareholder. Interested shareholders generally include: • any person who is the beneficial owner of 15% or more of our outstanding voting stock; or • any person who is our affiliate or associate and who held 15% or more of our outstanding voting stock at any time within three years before the date on which the person’s status as an interested shareholder is determined, and the affiliates and associates of such person. Subject to certain exceptions, a business combination includes, among other things: • certain mergers or consolidations of us or any direct or indirect majority-owned subsidiary of ours; • any sale, lease, exchange, mortgage, pledge, transfer or other disposition of our assets or of any subsidiary of ours having an aggregate fair market value equal to 10% or more of either the aggregate fair market value of all of our assets, determined on a combined basis, or the aggregate value of all of our outstanding stock; • certain transactions that result in the issuance or transfer by us of any stock of ours to the interested shareholder; • any transaction involving us or any of our subsidiaries that has the effect of increasing the proportionate share of any class or series of stock, or securities convertible into any class or series of stock, of ours or any such subsidiary that is owned directly or indirectly by the interested shareholder or any affiliate or associate of the interested shareholder; and • any receipt by the interested shareholder of the benefit directly or indirectly (except proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial benefits provided by or through us. These provisions of our amended and restated articles of incorporation do not apply to a business combination if: • before a person became an interested shareholder, our board of directors approved either the business combination or the transaction in which the shareholder became an interested shareholder; • upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than certain excluded shares; • at or following the transaction in which the person became an interested shareholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock that is not owned by the interest shareholder; 111 • • • the shareholder was or became an interested shareholder prior to the closing of our initial public offering in 2010; a shareholder became an interested shareholder inadvertently and (i) as soon as practicable divested itself of ownership of sufficient shares so that the shareholder ceased to be an interested shareholder; and (ii) would not, at any time within the three-year period immediately prior to a business combination between us and such shareholder, have been an interested shareholder but for the inadvertent acquisition of ownership; or the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required under our amended and restated articles of incorporation which (i) constitutes one of the transactions described in the following sentence; (ii) is with or by a person who either was not an interested shareholder during the previous three years or who became an interested shareholder with the approval of the board; and (iii) is approved or not opposed by a majority of the members of the board of directors then in office (but not less than one) who were directors prior to any person becoming an interested shareholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to: (i) a merger or consolidation of us (except for a merger in respect of which, pursuant to the BCA, no vote of our shareholders is required); (ii) a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of us or of any direct or indirect majority-owned subsidiary of ours (other than to any direct or indirect wholly-owned subsidiary or to us) having an aggregate fair market value equal to 50% or more of either the aggregate fair market value of all of our assets determined on a consolidated basis or the aggregate fair market value of all the outstanding shares; or (iii) a proposed tender or exchange offer for 50% or more of our outstanding voting stock. Registrar and Transfer Agent The registrar and transfer agent for our common shares is Computershare, Inc. Listing Our common shares are listed on the New York Stock Exchange under the symbol “STNG.” C. Material Contracts Attached as exhibits to this annual report are the contracts we consider to be both material and outside the ordinary course of business during the two-year period immediately preceding the date of this annual report. We refer you to “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Long-Term Debt Obligations and Credit Arrangements” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” for a discussion of these agreements. Other than as set forth above, there were no material contracts, other than contracts entered into in the ordinary course of business, to which we were a party during the two year period immediately preceding the date of this annual report. D. Exchange Controls Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common shares. E. Taxation United States Federal Income Tax Considerations In the opinion of Seward & Kissel LLP, the following are the material United States federal income tax consequences to us of our activities and to United States Holders and Non-United States Holders, each as defined below, of 112 the ownership of common shares. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, or the Treasury Regulations, all of which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business in this Report and assumes that we conduct our business as described herein. References in the following discussion to the “Company,” “we,” “our” and “us” are to Scorpio Tankers Inc. and its subsidiaries on a consolidated basis. United States Federal Income Taxation of Operating Income: In General We earn and anticipate that we will continue to earn substantially all our income from the hiring or leasing of vessels for use on a time charter basis, from participation in a pool or from the performance of services directly related to those uses, all of which we refer to as “shipping income.” Unless exempt from United States federal income taxation under the rules of Section 883 of the Code, or Section 883, as discussed below, a foreign corporation such as us will be subject to United States federal income taxation on its “shipping income” that is treated as derived from sources within the United States, which we refer to as “United States source shipping income.” For United States federal income tax purposes, “United States source shipping income” includes 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States. Shipping income attributable to transportation exclusively between non-United States ports will be considered to be 100% derived from sources entirely outside the United States. Shipping income derived from sources outside the United States will not be subject to any United States federal income tax. Shipping income attributable to transportation exclusively between United States ports is considered to be 100% derived from United States sources. However, we are not permitted by United States law to engage in the transportation of cargoes that produces 100% United States source shipping income. Unless exempt from tax under Section 883, our gross United States source shipping income would be subject to a 4% tax imposed without allowance for deductions, as described more fully below. Exemption of Operating Income from United States Federal Income Taxation Under Section 883 and the Treasury Regulations thereunder, a foreign corporation will be exempt from United States federal income taxation on its United States source shipping income if: (1) it is organized in a “qualified foreign country,” which is one that grants an “equivalent exemption” from tax to corporations organized in the United States in respect of each category of shipping income for which exemption is being claimed under Section 883; and (2) one of the following tests is met: (A) more than 50% of the value of its shares is beneficially owned, directly or indirectly, by “qualified shareholders,” which as defined includes individuals who are “residents” of a qualified foreign country, which we refer to as the “50% Ownership Test”; or (B) its shares are “primarily and regularly traded on an established securities market” in a qualified foreign country or in the United States, to which we refer as the “Publicly-Traded Test”. The Republic of the Marshall Islands, the jurisdiction where we and our ship-owning subsidiaries are incorporated, has been officially recognized by the IRS as a qualified foreign country that grants the requisite “equivalent exemption” from tax in respect of each category of shipping income we earn and currently expect to earn in the future. Therefore, we will be exempt from United States federal income taxation with respect to our United States source shipping income if we satisfy either the 50% Ownership Test or the Publicly-Traded Test. For our 2015 taxable tax year, we intend to take the position that we satisfy the Publicly-Traded Test and we anticipate that we will continue to satisfy the Publicly-Traded Test for future taxable years. However, as discussed below, this is a factual determination made on an annual basis. We do not currently anticipate a circumstance under which we would be able to satisfy the 50% Ownership Test. 113 Publicly-Traded Test The Treasury Regulations under Section 883 provide, in pertinent part, that shares of a foreign corporation will be considered to be “primarily traded” on an established securities market in a country if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common shares, which constitute our sole class of issued and outstanding stock, are “primarily traded” on the NYSE. Under the Treasury Regulations, our common shares will be considered to be “regularly traded” on an established securities market if one or more classes of our stock representing more than 50% of our outstanding stock, by both total combined voting power of all classes of stock entitled to vote and total value, are listed on such market, to which we refer as the “Listing Threshold.” Since our common shares are listed on the NYSE, we expect to satisfy the Listing Threshold. It is further required that with respect to each class of stock relied upon to meet the Listing Threshold, (i) such class of stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or one-sixth of the days in a short taxable year, or the “Trading Frequency Test”; and (ii) the aggregate number of shares of such class of stock traded on such market during the taxable year is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year, or the “Trading Volume Test.” We currently satisfy and anticipate that it will continue to satisfy the Trading Frequency Test and Trading Volume Test. Even if this were not the case, the Treasury Regulations provide that the Trading Frequency Test and Trading Volume Tests will be deemed satisfied if, as is the case with our common shares, such class of stock is traded on an established securities market in the United States and such class of stock is regularly quoted by dealers making a market in such stock. Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that a class of stock will not be considered to be “regularly traded” on an established securities market for any taxable year during which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of such class of outstanding shares, to which we refer as the “5% Override Rule.” For purposes of being able to determine the persons who actually or constructively own 5% or more of the vote and value of our common shares, or “5% Shareholders,” the Treasury Regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the SEC as owning 5% or more of our common shares. The Treasury Regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes. In the event the 5% Override Rule is triggered, the Treasury Regulations provide that the 5% Override Rule will nevertheless not apply if we can establish that within the group of 5% Shareholders, there are sufficient qualified shareholders for purposes of Section 883 to preclude non-qualified shareholders in such group from owning 50% or more of our common shares for more than half the number of days during the taxable year. In order to benefit from this exception to the 5% Override Rule, we must satisfy certain substantiation requirements in regards to the identity of its 5% Shareholders. We believe that we currently satisfy the Publicly-Traded Test and intend to take this position on our United States federal income tax return for the 2015 taxable year. However, there are factual circumstances beyond our control that could cause us to lose the benefit of the Section 883 exemption. For example, if we trigger the 5% Override Rule for any future taxable year, there is no assurance that we will have sufficient qualified 5% Shareholders to preclude nonqualified 5% Shareholders from owning 50% or more of our common shares for more than half the number of days during such taxable year, or that we will be able to satisfy the substantiation requirements in regards to our 5% Shareholders. United States Federal Income Taxation in Absence of Section 883 Exemption If the benefits of Section 883 are unavailable, our United States source shipping income would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, which we refer to as the “4% gross basis tax regime,” to the extent that such income is not considered to be “effectively connected” with the conduct of a United States trade or business, as described below. Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being United States source shipping income, the maximum effective rate of United States federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime. To the extent our United States source shipping income is considered to be “effectively connected” with the conduct of a United States trade or business, as described below, any such “effectively connected” United States source shipping income, net of applicable deductions, would be subject to United States federal income tax, currently imposed at rates of up 114 to 35%. In addition, we would generally be subject to the 30% “branch profits” tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our United States trade or business. Our United States source shipping income would be considered “effectively connected” with the conduct of a United States trade or business only if: • we have, or are considered to have, a fixed place of business in the United States involved in the earning of United States source shipping income; and • substantially all of our United States source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States. We do not currently have, intend to have, or permit circumstances that would result in having, any vessel sailing to or from the United States on a regularly scheduled basis. Based on the foregoing and on the expected mode of our shipping operations and other activities, it is anticipated that none of our United States source shipping income will be “effectively connected” with the conduct of a United States trade or business. United States Federal Income Taxation of Gain on Sale of Vessels If we qualify for exemption from tax under Section 883 in respect of the shipping income derived from the international operation of our vessels, then gain from the sale of any such vessel should likewise be exempt from United States federal income tax under Section 883. If, however, our shipping income from such vessels does not for whatever reason qualify for exemption under Section 883, then any gain on the sale of a vessel will be subject to United States federal income tax if such sale occurs in the United States. To the extent possible, we intend to structure the sales of our vessels so that the gain therefrom is not subject to United States federal income tax. However, there is no assurance we will be able to do so. United States Federal Income Taxation of United States Holders The following is a discussion of the material United States federal income tax considerations relevant to an investment decision by a United States Holder, as defined below, with respect to our common shares. This discussion does not purport to deal with the tax consequences of owning common shares to all categories of investors, some of which may be subject to special rules. This discussion only addresses considerations relevant to those United States Holders who hold the common shares as capital assets, that is, generally for investment purposes. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or foreign law of the ownership of common shares. As used herein, the term “United States Holder” means a beneficial owner of common shares that is an individual United States citizen or resident, a United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. If a partnership holds our common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding common shares, you are encouraged to consult your tax advisor. Distributions Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common shares to a United States Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of such earnings and profits will be treated first as a nontaxable return of capital to the extent of the United States Holder’s tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, United States Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally be treated as “passive category income” for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes. 115 Dividends paid on our common shares to a United States Holder who is an individual, trust or estate (a “United States Non-Corporate Holder”) will generally be treated as “qualified dividend income” that is taxable to such United States Non-Corporate Holder at preferential tax rates provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the NYSE, on which our common shares are traded); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which, as discussed below, we believe we have not been, we believe we are not and do not anticipate being in the future); (3) the United States Non-Corporate Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend; and (4) the United States Non- Corporate Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. Any distributions out of earnings and profits we pay which are not eligible for these preferential rates will be taxed as ordinary income to a United States Non-Corporate Holder. Special rules may apply to any “extraordinary dividend”—generally, a dividend in an amount which is equal to or in excess of 10% of a shareholder’s adjusted tax basis in his common shares—paid by us. If we pay an “extraordinary dividend” on our common shares that is treated as “qualified dividend income,” then any loss derived by a United States Non-Corporate Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend. Sale, Exchange or Other Disposition of Common Shares Assuming we do not constitute a passive foreign investment company for any taxable year, a United States Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount realized by the United States Holder from such sale, exchange or other 94 disposition and the United States Holder’s tax basis in such shares. Such gain or loss will be treated as long-term capital gain or loss if the United States Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States source income or loss, as applicable, for United States foreign tax credit purposes. Long-term capital gains of United States Non-Corporate Holders are currently eligible for reduced rates of taxation. A United States Holder’s ability to deduct capital losses is subject to certain limitations. Passive Foreign Investment Company Status and Significant Tax Consequences Special United States federal income tax rules apply to a United States Holder that holds shares in a foreign corporation classified as a “passive foreign investment company”, or a PFIC, for United States federal income tax purposes. In general, we will be treated as a PFIC with respect to a United States Holder if, for any taxable year in which such Holder holds our common shares, either: • • at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income. For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25% of the value of the subsidiary’s stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute “passive income” unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business. Based on our current operations and future projections, we do not believe that we have been, are, nor do we expect to become, a passive foreign investment company with respect to any taxable year. Although there is no legal authority directly on point, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Accordingly, such income should not constitute passive income, and the assets that we own and operate in connection with the production of such income, in particular, the vessels, should not constitute assets that produce or are held for the production of passive income for purposes of determining whether we are a PFIC. Therefore, based on our current operations and future projections, we should not be treated as a PFIC with respect to any taxable year. There is substantial legal authority supporting this position, consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority that characterizes time charter income as rental income rather than services income for other tax purposes. It should be noted 116 that in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with our position. Furthermore, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future. As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a United States Holder would be subject to different United States federal income taxation rules depending on whether the United States Holder makes an election to treat us as a “Qualified Electing Fund,” which election we refer to as a “QEF election.” As an alternative to making a QEF election, a United States Holder should be able to make a “mark-to-market” election with respect to our common shares, as discussed below. In addition, if we were to be treated as a PFIC for any taxable year, a United States Holder will generally be required to file an annual report with the IRS for that year with respect to such Holder’s common shares. Taxation of United States Holders Making a Timely QEF Election If a United States Holder makes a timely QEF election, which United States Holder we refer to as an “Electing Holder,” the Electing Holder must report for United States federal income tax purposes his pro rata share of our ordinary earnings and net capital gain, if any, for each of our taxable years during which we are a PFIC that ends with or within the taxable year of the Electing Holder, regardless of whether distributions were received from us by the Electing Holder. No portion of any such inclusions of ordinary earnings will be treated as “qualified dividend income.” Net capital gain inclusions of United States Non-Corporate Holders would be eligible for preferential capital gain tax rates. The Electing Holder’s adjusted tax basis in the common shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once distributed. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any taxable year. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common shares. A United States Holder would make a timely QEF election for our shares by filing one copy of IRS Form 8621 with his United States federal income tax return for the first year in which he held such shares when we were a PFIC. If we were to be treated as a PFIC for any taxable year, we would provide each United States Holder with all necessary information in order to make the QEF election described above. Taxation of United States Holders Making a “Mark-to-Market” Election Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate will be the case, our common shares are treated as “marketable stock,” a United States Holder would be allowed to make a “mark-to-market” election with respect to our common shares, provided the United States Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the United States Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common shares at the end of the taxable year over such Holder’s adjusted tax basis in the common shares. The United States Holder would also be permitted an ordinary loss in respect of the excess, if any, of the United States Holder’s adjusted tax basis in the common shares over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A United States Holder’s tax basis in his common shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the United States Holder. Taxation of United States Holders Not Making a Timely QEF or Mark-to-Market Election Finally, if we were to be treated as a PFIC for any taxable year, a United States Holder who does not make either a QEF election or a “mark-to-market” election for that year, whom we refer to as a “Non-Electing Holder,” would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on the common shares in a taxable year in excess of 125% of the average annual distributions received by the Non- Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common shares), and (2) any gain realized on the sale, exchange or other disposition of our common shares. Under these special rules: • the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common shares; 117 • • the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, would be taxed as ordinary income and would not be “qualified dividend income”; and the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. United States Federal Income Taxation of “Non-United States Holders” A beneficial owner of common shares (other than a partnership) that is not a United States Holder is referred to herein as a “Non-United States Holder.” If a partnership holds common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding common shares, you are encouraged to consult your tax advisor. Dividends on Common Stock A Non-United States Holder generally will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to his common shares, unless that income is effectively connected with the Non- United States Holder’s conduct of a trade or business in the United States. If the Non-United States Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income is subject to United Stated federal income tax only if it is attributable to a permanent establishment maintained by the Non-United States Holder in the United States. Sale, Exchange or Other Disposition of Common Shares Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless: • • the gain is effectively connected with the Non-United States Holder’s conduct of a trade or business in the United States (and, if the Non-United States Holder is entitled to the benefits of a United States income tax treaty with respect to that gain, that gain is attributable to a permanent establishment maintained by the Non- United States Holder in the United States); or the Non-United States Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met. If the Non-United States Holder is engaged in a United States trade or business for United States federal income tax purposes, dividends on the common shares, and gains from the sale, exchange or other disposition of such shares, that are effectively connected with the conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of United States Holders. In addition, if you are a corporate Non-United States Holder, your earnings and profits that are attributable to the effectively connected income, subject to certain adjustments, may be subject to an additional “branch profits” tax at a rate of 30%, or at a lower rate as may be specified by an applicable United States income tax treaty. Backup Withholding and Information Reporting In general, dividend payments, or other taxable distributions, made within the United States to you will be subject to information reporting requirements if you are a non-corporate United States Holder. Such payments or distributions may also be subject to backup withholding if you are a non-corporate United States Holder and you: • fail to provide an accurate taxpayer identification number; • are notified by the IRS that you have failed to report all interest or dividends required to be shown on your United States federal income tax returns; or • in certain circumstances, fail to comply with applicable certification requirements. Non-United States Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on an appropriate IRS Form W-8. 118 If you are a Non-United States Holder and you sell your common shares to or through a United States office of a broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless you certify that you are a non-United States person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-United States office of a non-United States broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non- United States office of a broker that is a United States person or has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence in its records that you are a non-United States person and certain other conditions are met, or you otherwise establish an exemption. Backup withholding is not an additional tax. Rather, you generally may obtain a refund of any amounts withheld under backup withholding rules that exceed your United States federal income tax liability by filing a refund claim with the IRS. Individuals who are United States Holders (and to the extent specified in applicable Treasury Regulations, certain individuals who are Non- United States Holders and certain United States entities) who hold “specified foreign financial assets” (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury regulations). Specified foreign financial assets would include, among other assets, our common shares, unless the shares are held through an account maintained with a United States financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual United States Holder (and to the extent specified in applicable Treasury Regulations, an individual Non- United States Holder or a United States entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of United States federal income taxes of such holder for the related tax year may not close until three years after the date that the required IRS Form 8938 is filed. United States Holders (including United States entities) and Non- United States Holders are encouraged consult their own tax advisors regarding their reporting obligations under this legislation. F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E. Washington, D.C. 20549, or from its website http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-0330, and you may obtain copies at prescribed rates. Shareholders may also visit the Investor Relations section of our website at www.scorpiotankers.com or request a copy of our filings at no cost, by writing or telephoning us at the following address: Scorpio Tankers Inc., 9, Boulevard Charles III Monaco 98000, +377-9898-5716. I. Subsidiary Information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to the impact of interest rate changes primarily through our unhedged variable-rate borrowings. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service our debt. From time to time, we will use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our variable-rate 119 debt and are not for speculative or trading purposes. We entered into six interest rate swaps in August 2011 and which went into effect on July 1, 2012 for an aggregate notional amount of $75.0 million, which was reduced to $66.0 million in September 2012 and further reduced to $45.0 million in March 2014. The fair market value of our interest rate swaps was a liability of $0.2 million at December 31, 2014. In March 2015, we terminated three of the interest rate swaps relating to our 2010 Revolving Credit Facility. As a result of the termination, we made a repayment of $0.1 million to settle the liability and recognized a realized gain of $0.1 million during the year ended December 31, 2015. Additionally, the three interest rate swaps under our 2011 Credit Facility expired in June 2015. Based on the floating rate debt at December 31, 2015 and 2014, a one-percentage point increase in the floating interest rate would increase interest expense by $16.3 million and $11.7 million per year, respectively. The following table presents the due dates for the principal payments on our fixed and floating rate debt: As of December 31, In thousands of U.S. dollars Principal payments floating rate debt ................................ Principal payments fixed rate debt ..................................... Total principal payments on outstanding debt ................... 2016 $ 128,285 53,372 $ 181,657 Spot Market Rate Risk $ 2017 - 2018 2019 -2020 $ 658,652 412,250 $ 1,070,902 333,740 51,750 385,490 $ $ Thereafter 512,433 — 512,433 $ The cyclical nature of the tanker industry causes significant increases or decreases in the revenue that we earn from our vessels, particularly those vessels that operate in the spot market or participate in pools that are concentrated in the spot market such as the Scorpio Group Pools. We currently have six vessels on time charter contracts. Additionally, we have the ability to remove our vessels from the pools on relatively short notice if attractive time charter opportunities arise. A $1,000 per day increase or decrease in spot rates for all of our vessel classes would have increased or decreased our operating income by $31.4 million and $20.2 million for the years ended December 31, 2015 and 2014, respectively. Foreign Exchange Rate Risk Our primary economic environment is the international shipping market. This market utilizes the US dollar as its functional currency. Consequently, virtually all of our revenues and the majority of our operating expenses are in US dollars. However, we incur some of our combined expenses in other currencies, particularly the Euro. The amount and frequency of some of these expenses (such as vessel repairs, supplies and stores) may fluctuate from period to period. Depreciation in the value of the US dollar relative to other currencies will increase the US dollar cost of us paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations. There is a risk that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect against currency fluctuations. However, we have some ability to shift the purchase of goods and services from one country to another and, thus, from one currency to another, on relatively short notice. We may seek to hedge this currency fluctuation risk in the future. Bunker Price Risk Our operating results are affected by movement in the price of fuel oil consumed by the vessels – known in the industry as bunkers. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the profitability. We do not hedge our exposure to bunker price risk. Inflation We do not expect inflation to be a significant risk to direct expenses in the current and foreseeable economic environment. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable. 120 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES PART II None. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS None. ITEM 15. CONTROLS AND PROCEDURES A. Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our controls and procedures are designed to provide reasonable assurance of achieving their objectives. We carried out an evaluation under the supervision, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e ) as of December 31, 2015. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2015 to provide reasonable assurance that (1) information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. B. Management’s Annual Report on Internal Control Over Financial Reporting In accordance with Rule 13a-15(f) of the Exchange Act, the management of the Company is responsible for the establishment and maintenance of adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Management has performed an assessment of the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2015 based on the provisions of Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in 2013. Based on our assessment, management determined that the Company’s internal controls over financial reporting was effective as of December 31, 2015 based on the criteria in Internal Control—Integrated Framework issued by COSO (2013). The Company’s internal control over financial reporting, at December 31, 2015, has been audited by PricewaterhouseCoopers Audit, an independent registered public accounting firm, who also audited the Company’s consolidated financial statements for that year. Their audit report on the effectiveness of internal control over financial reporting is presented in “Item 18. Financial Statements.” C. Attestation Report of the Registered Public Accounting Firm The attestation report of the Registered Public Accounting Firm is presented on page F-2 of the Financial Statements filed as part of this annual report. 121 D. Changes in Internal Control Over Financial Reporting None ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Our Board of Directors has determined that Mr. Ademaro Lanzara, who serves on the Audit Committee, qualifies as an “audit committee financial expert” and that he is “independent” in accordance with SEC rules. ITEM 16B. CODE OF ETHICS We have adopted a code of ethics applicable to officers, directors and employees, which complies with applicable guidelines issued by the SEC. Our code of ethics is filed as an exhibit to our annual report filed on March 31, 2014 on form 20-F for the year ended December 31, 2013 and can be found on our website at www.scorpiotankers.com. We will also provide a hard copy of our code of ethics free of charge upon written request to Scorpio Tankers Inc., 9 Boulevard Charles III, Monaco, 98000. ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES A. Audit Fees Our principal accountant for fiscal years ended December 31, 2015 and 2014 was PricewaterhouseCoopers Audit (Marseille, France) and the audit fee for those periods was $553,000 and $497,000, respectively. During 2015, our principal accountant, PricewaterhouseCoopers Audit, provided additional services related to our May 2015 underwritten offering of common stock. The fee for this service was $47,189. During 2014, our principal accountant, PricewaterhouseCoopers Audit, provided additional services related to the issuance of our Senior Unsecured Notes Due 2020, Convertible Notes and Senior Unsecured Notes Due 2017 that were completed in May 2014, June 2014 and October 2014, respectively. The fees for these services were $48,000, $41,500 and $91,695, respectively. B. Audit-Related Fees None C. Tax Fees None D. All Other Fees None E. Audit Committee’s Pre-Approval Policies and Procedures Our Audit Committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services. F. Audit Work Performed by Other Than Principal Accountant if Greater Than 50% Not applicable. ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS In May 2015, our Board of Directors authorized a new Securities Repurchase Program to purchase up to an aggregate of $250 million of our common stock and bonds, which currently consist of our (i) Convertible Notes (ii) Senior Notes Due 2020 (NYSE: SBNA), and (iii) Senior Notes Due 2017 (NYSE: SBNB). This program replaces our stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program. 122 During the year ended December 31, 2015, we have repurchased the following: • an aggregate of 8,273,709 of our common shares that are being held as treasury shares at an average price of $9.19 per share (7,527,070 shares were purchased at an average price at $9.32 under the May 2015 $250 million Securities Repurchase Program; the remaining 746,639 shares were purchased at an average price of $7.91 per share in the first quarter of 2015 under the July 2014 stock buyback program). • $1.5 million face value of our Convertible Notes at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the May 2015 $250 million Securities Repurchase Program). See Note 11 for a description of this transaction. The amounts of our common shares purchased in 2015 by month, including commissions, are set out in the table below: Period February ............................. July .................................... August ................................ September .......................... October .............................. November .......................... December ........................... Total number of shares purchased 746,639 270,349 3,866,155 469,201 225,000 943,290 1,753,075 8,273,709 Average price paid per share $ $ $ $ $ $ $ $ 7.91 10.06 9.91 9.38 9.04 8.78 8.20 9.19 Total number of shares purchased as part of publicly announced program 746,639 270,349 3,866,155 469,201 225,000 943,290 1,753,075 8,273,709 Maximum amount that may yet be expected on share repurchases under program $ $ $ $ $ $ $ $ 69,314,426 245,648,653(1) 207,327,563 202,926,561 200,893,506 192,614,963 178,246,542 178,246,542 (1) Amount reflects the new $250 million authorization limit under our Securities Repurchase Program, which was authorized in May 2015. Furthermore, the amount authorized for repurchase was reduced by $1.6 million in July 2015 when we repurchased $1.5 million face value of our Convertible Senior Notes Due 2019 at an average price of $1,088.10 per $1,000 principal amount under this program. This repurchase is not reflected in the above table. From January 1, 2016 through March 17, 2016, we repurchased an aggregate of 2,229,606 of our common shares that are being held as treasury shares at an average price of $5.96 per share. There were 173,035,794 shares outstanding as of March 17, 2016. We had $164.5 million remaining available under our Securities Repurchase Program as of March 17, 2016. We expect to repurchase any securities in the open market, at times and prices that are considered to be appropriate, but we are not obligated under the terms of the program to repurchase any securities. ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT None. ITEM 16G. CORPORATE GOVERNANCE Pursuant to an exception for foreign private issuers, we, as a Marshall Islands company, are not required to comply with the corporate governance practices followed by U.S. companies under the NYSE listing standards. We believe that our established practices in the area of corporate governance are in line with the spirit of the NYSE standards and provide adequate protection to our shareholders. In this respect, we have voluntarily adopted NYSE required practices, such as (i) having a majority of independent directors, (ii) establishing audit, compensation and nominating committees and (iii) adopting a Code of Ethics. There are two significant differences between our corporate governance practices and the practices required by the NYSE. The NYSE requires that non-management directors meet regularly in executive sessions without management. The NYSE also requires that all independent directors meet in an executive session at least once a year. The Marshall Islands law and our bylaws do not require our non-management directors to regularly hold executive sessions without management. During 2015 and through the date of this annual report, our non-management directors met in executive session five times. The NYSE requires companies to adopt and disclose corporate governance guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession and an annual performance evaluation. We are not required to adopt such guidelines under Marshall Islands law and we have not adopted such guidelines. ITEM 16H. MINE SAFETY DISCLOSURE Not applicable. 123 PART III ITEM 17. FINANCIAL STATEMENTS See “Item 18. Financial Statements.” ITEM 18. FINANCIAL STATEMENTS The financial information required by this Item is set forth beginning on page F-1 and is filed as part of this annual report. ITEM 19. EXHIBITS Exhibit Number Description 1.1 1.2 1.3 2.1 2.3 2.4 2.5 2.6 2.7 2.8 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 Amended and Restated Articles of Incorporation of the Company (1) Amended and Restated Bylaws of the Company (3) Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company (11) Form of Stock Certificate (1) Form of Senior Debt Securities Indenture (5) Form of Subordinated Debt Securities Indenture (5) Base Indenture, dated May 12, 2014, by and between the Company and Deutsche Bank Trust Company (9) Supplemental Indenture to the Base Indenture, dated May 12, 2014, by and between the Company and Deutsche Bank Trust Company Americas, as trustee, relating to the Company’s 6.75% Senior Notes due 2020 (9) Indenture, dated June 30, 2014, by and between the Company and Deutsche Bank Trust Company Americas, as trustee, relating to the Company’s 2.375% Convertible Notes due 2019 (11) Second Supplemental Indenture to the Base Indenture, dated October 31, 2014, by and between the Company and Deutsche Bank Trust Company Americas, as trustee, relating to the Company’s 7.50% Senior Notes due 2017 (10) 2010 Revolving Credit Facility, as amended and restated on July 12, 2011 (6) Letter Agreement to 2010 Revolving Credit Facility (as amended and restated on July 12, 2011), dated September 22, 2011 (6) First Amendatory Agreement to 2010 Revolving Credit Facility (as amended and restated on July 12, 2011), dated December 22, 2011 (6) 2010 Equity Incentive Plan (3) 2013 Amended and Restated Equity Incentive Plan (8) Administrative Services Agreement between the Company and Liberty Holding Company Ltd. (2) Master Agreement between the Company, SSM and SCM dated January 24, 2013 (7) STI Spirit Credit Facility, dated March 9, 2011 (4) Letter Agreement to STI Spirit Credit Facility, dated September 28, 2011 (6) First Amendatory Agreement to STI Spirit Credit Facility, dated December 30, 2011 (6) 2011 Credit Facility, dated May 3, 2011 (6) Letter Agreement to 2011 Credit Facility, dated September 22, 2011 (6) First Amendatory Agreement to 2011 Credit Facility, dated June 27, 2011 (6) Second Amendatory Agreement to 2011 Credit Facility, dated December 22, 2011 (6) Newbuilding Credit Facility, dated December 21, 2011 (6) 2013 Credit Facility, dated July 2, 2013 (8) KEXIM Credit Facility, dated February 28, 2014 (8) 124 Exhibit Number Description 4.18 4.19 4.20 4.21 4.22 4.23 4.24 8.1 11.1 11.2 11.3 12.1 12.2 13.1 K-Sure Credit Facility, dated February 24, 2014 (8) Second Supplemental Agreement to ING Credit Facility, dated February 29, 2016 ABN AMRO Credit Facility, dated July 16, 2015 First Amendment Agreement to ABN AMRO Credit Facility, dated September 15, 2015 Second Amendment Agreement to ABN AMRO Credit Facility, dated October 20, 2015 Credit Suisse Credit Facility, dated October 30, 2015 BNP Paribas Credit Facility, dated December 18, 2015 Subsidiaries of the Company Code of Ethics (7) Whistleblower Policy (8) Whistleblower Policy - Environmental (8) Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 13.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1 Consent of Drewry Shipping Consultants, Ltd. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Filed as an Exhibit to the Company’s Amended Registration Statement on Form F-1/A (Amendment No. 1) (File No. 333-164940) on March 10, 2010, and incorporated by reference herein. Filed as an Exhibit to the Company’s Amended Registration Statement on Form F-1/A (Amendment No. 2) (File No. 333-164940) on March 18, 2010, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on June 29, 2010, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report filed on Form 20-F on April 21, 2011, and incorporated by reference herein. Filed as an Exhibit to the Company’s Registration Statement on Form F-3 (File No. 333-173929) on May 4, 2011, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report on Form 20-F on April 13, 2012, as amended, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report on Form 20-F on March 29, 2013, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report on Form 20-F on March 31, 2014, and incorporated by reference herein. Filed as an Exhibit to the Company’s Report on Form 6-K on May 13, 2014, and incorporated by reference herein. Filed as an Exhibit to the Company’s Report on Form 6-K on October 31, 2014, and incorporated by reference herein. Filed as an Exhibit to the Company’s Annual Report on Form 20-F on March 31, 2015, and incorporated by reference herein. 125 The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf. SIGNATURES Dated March 18, 2016 Scorpio Tankers Inc. (Registrant) /s/ Emanuele Lauro Emanuele Lauro Chief Executive Officer 126 SCORPIO TANKERS INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm .......................................................................................... Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014 ......................................................... Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013 ..................................... Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013 ........................................................................................................................... Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2015, 2014 and 2013 ........................................................................................................................... Consolidated Statements of Cash Flow for the years ended December 31, 2015, 2014 and 2013 ................................ Notes to Consolidated Financial Statements .................................................................................................................. Page F-2 F-3 F-4 F-5 F-6 F-7 F-9 F-1 Report of Independent Registered Public Accounting Firm To the board of Directors and Shareholders of Scorpio Tankers Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Scorpio Tankers Inc. and its subsidiaries at December 31, 2015 and December 31, 2014 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, appearing under item 15. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on Auditing. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PRICEWATERHOUSECOOPERS AUDIT Monaco, Principality of Monaco March 18, 2016 F-2 Scorpio Tankers Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2015 and 2014 In thousands of U.S. dollars Assets Current assets Cash and cash equivalents ................................................... Accounts receivable ............................................................. Prepaid expenses and other current assets ........................... Inventories ........................................................................... Vessels held for sale ............................................................ Total current assets ............................................................ Non-current assets Vessels and drydock ............................................................ Vessels under construction .................................................. Other assets .......................................................................... Available for sale investment .............................................. Total non-current assets .................................................... Total assets ......................................................................... Current liabilities Current portion of long-term debt ........................................ Debt related to vessels held for sale ..................................... Finance lease liability .......................................................... Accounts payable ................................................................. Accrued expenses ................................................................ Derivative financial instruments .......................................... Total current liabilities ...................................................... Non-current liabilities Long-term debt .................................................................... Derivative financial instruments .......................................... Total non-current liabilities .............................................. Total liabilities .................................................................... Shareholders’ equity Issued, authorized and fully paid-in share capital: Common stock, $0.01 par value per share; 400,000,000 shares authorized; 175,335,400 and 164,574,542 issued and outstanding shares as of December 31, 2015 and December 31, 2014, respectively. .................................... Additional paid-in capital .................................................... Treasury shares .................................................................... Accumulated other comprehensive loss ............................... Retained earnings / (accumulated deficit) ............................ Total shareholders’ equity ................................................ Total liabilities and shareholders’ equity......................... Notes December 31, 2015 December 31, 2014 As of 2 3 4 4/6 5/6 7 8 11 11 11 9 10 12 11 12 14 14 14 $ $ $ $ $ 200,970 69,017 3,585 6,575 — 280,147 3,087,753 132,218 23,337 — 3,243,308 3,523,455 124,503 — 53,372 25,683 32,643 1,175 237,376 1,872,114 80 1,872,194 2,109,570 2,224 1,729,314 (427,311 ) — 109,658 1,413,885 3,523,455 $ 116,143 78,201 2,420 6,075 70,865 273,704 1,971,878 404,877 23,728 130,456 2,530,939 2,804,643 87,163 32,932 — 14,929 55,139 205 190,368 1,451,427 — 1,451,427 1,641,795 2,033 1,550,956 (351,283) (10,878) (27,980) 1,162,848 2,804,643 The accompanying notes are an integral part of these consolidated financial statements. F-3 Scorpio Tankers Inc. and Subsidiaries Consolidated Statements of Income For the years ended December 31, 2015, 2014 and 2013 In thousands of U.S. dollars except per share and share data Revenue Vessel revenue .................................................................. Operating expenses Vessel operating costs ....................................................... Voyage expenses .............................................................. Charterhire ........................................................................ Depreciation General and administrative expenses ................................ Write down of vessels held for sale and net loss from sales of vessels .............................................................. Write-off of vessel purchase options ................................ Gain on sale of VLGCs ..................................................... Gain on sale of VLCCs ..................................................... Gain on sale of Dorian shares ........................................... Re-measurement of investment in Dorian ........................ Total operating expenses .................................................. Operating income ............................................................ Other (expense) and income, net Financial expenses ............................................................ Realized gain on derivative financial instruments ............ Unrealized (loss) / gain on derivative financial instruments .................................................................... Financial income ............................................................... Share of income from associate ........................................ Other expenses, net ........................................................... Total other expense, net .................................................... Net income ....................................................................... Attributable to: Equity holders of the parent .............................................. Earnings per share Basic ................................................................................. Diluted .............................................................................. Basic weighted average shares outstanding ...................... Diluted weighted average shares outstanding ................... For the year ended December 31, Notes 2015 2014 2013 16 $ 755,711 $ 342,807 $ 207,580 (174,556) (4,432) (96,865) (107,356) (65,831) (35) (731) — — 1,179 — (448,627) 307,084 (89,596) 55 (78,823) (7,533) (139,168) (42,617) (48,129) (3,978) — — 51,419 10,924 (13,895) (271,800) 71,007 (20,770) 17 (1,255) 145 — 1,316 (89,335) 217,749 $ 264 203 1,473 (103) (18,916) 52,091 $ (40,204) (4,846) (115,543) (23,595) (25,788) (21,187) — 41,375 — — — (189,788) 17,792 (2,705) 3 567 1,147 369 (158) (777) 17,015 217,749 $ 52,091 $ 17,015 $ $ 1.35 $ 1.20 $ $ $ 161,436,449 199,739,326 0.30 $ 0.30 $ 0.12 0.11 146,504,055 148,339,378 171,851,061 176,292,802 17 4 18 4 4 8 5 8 8 19 12 12 8 17 21 21 21 21 The accompanying notes are an integral part of these consolidated financial statements. F-4 Scorpio Tankers Inc. and Subsidiaries Consolidated Statements of Comprehensive Income For the years ended December 31, 2015, 2014 and 2013 In thousands of U.S. dollars Net income ............................................................................. Other comprehensive income / (loss): Items that may be reclassified subsequently to income or loss Change in value of available for sale investment ................... Cash flow hedges Unrealized gain on derivative financial instruments ............... Other comprehensive income / (loss) ................................... Total comprehensive income ................................................ Attributable to: Equity holders of the parent .................................................... Notes 8 12 For the year ended December 31, 2013 2014 2015 $ 217,749 52,091 $ $ 17,015 10,801 (10,801) — 77 10,878 $ 228,627 135 (10,666) 41,425 $ $ 228,627 $ 41,425 117 117 17,132 17,132 $ $ The accompanying notes are an integral part of these consolidated financial statements. F-5 Scorpio Tankers Inc. and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity For the years ended December 31, 2015, 2014 and 2013 Number of shares outstanding Share capital Additional paid- in capital Treasury shares (Accumulated deficit) / retained earnings Accumulated other comprehensive (loss) / income 63,827,846 $ In thousands of U.S. dollars except share data Balance as of January 1, 2013 .............................. — Net income for the period..................................... Other comprehensive income ............................... — Net proceeds from follow on offerings ................ 118,828,578 Issuance of restricted stock .................................. 8,999,998 — Amortization of restricted stock ........................... Dividends paid, $0.13 per share (1) ....................... — Shares issued for acquisition of vessels ............... 7,135,080 Balance as of December 31, 2013 ...................... 198,791,502 $ 1,999 $ 1,536,945 $ 519,493 $ — — 946,774 (90) 13,142 (24,353) 81,979 650 $ — — 1,188 90 — — 71 Balance as of January 1, 2014 .............................. 198,791,502 $ 1,999 $ 1,536,945 $ Net income for the period..................................... Other comprehensive loss .................................... Issuance of restricted stock .................................. Amortization of restricted stock ........................... Dividends paid, $0.39 per share (1) ....................... Purchase of treasury shares .................................. Equity component of the Convertible Notes, — — (34) 29,726 (70,495) — — — 3,362,176 — — — — 34 — — — (37,579,136) (7,938) $ — — — — — — — (7,938) $ (7,938) $ — — — — — (343,345) (97,086) $ 17,015 — — — — — — (80,071) $ (80,071) $ 52,091 — — — — — Total 414,790 17,015 117 947,962 — 13,142 (24,353) (329) $ — 117 — — — — 82,050 (212) $ 1,450,723 (10,666) — (212) $ 1,450,723 52,091 (10,666) — 29,726 (70,495) (343,345) — — — — net of issuance costs (see Note 11) .................. Shares issued for acquisition of vessels (see Note 5) ...................................................... — — — — 59,464 (4,650) — — Balance as of December 31, 2014 ...................... 164,574,542 $ 2,033 $ 1,550,956 $ (351,283) $ — — 59,464 — (27,980) $ — (4,650) (10,878) $ 1,162,848 Balance as of January 1, 2015 .............................. 164,574,542 $ 2,033 $ 1,550,956 $ (351,283) $ Net income for the period..................................... Other comprehensive income ............................... Net proceeds from follow on offerings ................ Issuance of restricted stock .................................. Amortization of restricted stock ........................... Dividends paid, $0.495 per share (1) ..................... Purchase of treasury shares .................................. Equity component of repurchase of the — — 17,177,123 1,857,444 — — — — 152,022 (19) 33,687 (6,945) — — — 172 19 — — — — — — — — — (8,273,709) (76,028) Convertible Notes (see Note 11) ...................... — — (387) — Balance as of December 31, 2015 ...................... 175,335,400 $ 2,224 $ 1,729,314 $ (427,311) $ (27,980) $ 217,749 — — — — (80,111) — — 109,658 $ (10,878) $ 1,162,848 217,749 10,878 152,194 — 33,687 (87,056) (76,028) — 10,878 — — — — — — (387) — $ 1,413,885 (1) The Company’s policy is to distribute dividends from available retained earnings first and then from additional paid in capital. The accompanying notes are an integral part of these consolidated financial statements. F-6 Scorpio Tankers Inc. and Subsidiaries Consolidated Cash Flow Statements For the years ended December 31, 2015, 2014 and 2013 In thousands of U.S. dollars Operating activities Net income ...................................................................................... Gain on sale of VLGCs ................................................................... Gain on sale of VLCCs ................................................................... Gain on sale of Dorian Shares ........................................................ Re-measurement of investment in Dorian....................................... Write down of vessels held for sale and net loss from sales of vessels ............................................................................ Write-off of vessel purchase options .............................................. Depreciation .................................................................................... Amortization of restricted stock ...................................................... Amortization of deferred financing fees ......................................... Straight-line adjustment for charterhire expense ............................ Share of profit from associate ......................................................... Unrealized loss / (gain) on derivative financial instruments ........... Amortization of acquired time charter contracts ............................. Accretion of Convertible Notes ...................................................... Gain on repurchase of Convertible Notes ....................................... Changes in assets and liabilities: Drydock payments .......................................................................... Increase in inventories .................................................................... Decrease / (increase) in accounts receivable ................................... Increase in prepaid expenses and other current assets .................... Increase in other assets ................................................................... Increase/(decrease) in accounts payable ......................................... Increase in accrued expenses .......................................................... Interest rate swap termination payment .......................................... Net cash inflow / (outflow) from operating activities ................. Investing activities Acquisition of vessels and payments for vessels under construction ..... Proceeds from disposal of vessels .......................................................... VLGC installment payments ................................................................. Investment in associate .......................................................................... Proceeds from sale of Dorian shares ...................................................... Deposit (returned)/received for vessel purchases ................................... Net cash outflow from investing activities ......................................... Financing activities Debt repayments .................................................................................... Issuance of debt ..................................................................................... Debt issuance costs ................................................................................ (Repayment) / proceeds of Convertible Notes ....................................... Convertible Notes issuance costs ........................................................... Gross proceeds from issuance of common stock ................................... Equity issuance costs ............................................................................. Dividends paid ....................................................................................... Repurchase of common stock ................................................................ Net cash inflow from financing activities ........................................... Increase / (decrease) in cash and cash equivalents ............................ Cash and cash equivalents at January 1, ................................................ Cash and cash equivalents at December 31, ...................................... Supplemental information: Interest paid ........................................................................................... F-7 Notes For the year ended December 31, 2013 2014 2015 217,749 — — (1,179) — 35 731 107,356 33,687 17,418 — — 1,255 513 11,096 (46) 388,615 — (1,909) 9,184 (1,615) (14,153) 775 11,206 (128) 3,360 391,975 (905,397) 90,820 — — 142,436 (31,277) (703,418) (226,260) 643,550 (8,497) (1,632) — 159,747 (7,554) (87,056) (76,028) 396,270 84,827 116,143 200,970 8 5 8 8 4 4 4 14 8 12 11 $ $ $ $ $ 52,091 — (51,419) (10,924) 13,895 17,015 (41,375) — — — 3,978 — 42,617 29,726 4,834 3 (1,473) (264) 478 5,330 — 88,872 (1,290) (3,218) (5,660) (154) (2,901) 6,471 12,070 (274) 5,044 93,916 (1,403,181) 213,670 — — — 31,277 (1,158,234) (74,674) 1,219,784 (45,670) 360,000 (10,993) — (42) (70,495) (276,294) 1,101,616 37,298 78,845 116,143 $ 21,187 — 23,595 13,142 332 53 (369) (567) — — — 33,013 (1,469) (687) (36,104) (823) (1,849) (2,021) 4,285 — (38,668) (5,655) (767,448) — (83,070) (84,583) — — (935,101) (28,410) 52,050 (14,693) — — 983,537 (35,695) (24,353) — 932,436 (8,320) 87,165 78,845 6,497 $ $ 63,418 $ 24,507 As of December 31, 2015 and 2013, we accrued $13.8 million and $15.0 million, respectively, for installment payments on vessels under our Newbuilding Program. These payments were made in January 2016 and 2014, respectively. In May 2014, we acquired 7,500,000 of our common shares from an existing shareholder in exchange for the sale to said shareholder of 3,422,665 common shares in Dorian in a privately negotiated transaction. The value of the acquired shares was $67.1 million, and we recognized a gain of $10.9 million. During the year ended December 31, 2013, we issued an aggregate of 7,135,080 common shares as partial consideration for the purchase of eight newbuilding MRs that were under construction in two separate transactions. These items represent significant non-cash transactions incurred during the years ended December 31, 2015, 2014 and 2013. The accompanying notes are an integral part of these consolidated financial statements F-8 Notes to the consolidated financial statements 1. General information and significant accounting policies Company Scorpio Tankers Inc. and its subsidiaries (together “we”, “our” or the “Company”) are engaged in the seaborne transportation of refined petroleum products in the international shipping markets. Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands on July 1, 2009. On April 6, 2010, we closed on our initial public offering, and the common stock currently trades on the New York Stock Exchange under the symbol STNG. Our fleet at December 31, 2015 consisted of 79 product tankers (14 Handymax, 47 MR and 18 LR2), 11 time chartered-in product tankers (three Handymax, four MR, two LR1, and two LR2), one LR2 bareboat chartered-in product tanker, and 12 product tankers under construction (four LR2 and eight MR). Our vessels are commercially managed by Scorpio Commercial Management S.A.M. (“SCM”), which is majority owned by the Lolli-Ghetti family of which, Emanuele Lauro, our Chairman and Chief Executive Officer, and Filippo Lauro, our Vice President, are members. SCM’s services include securing employment, in pools, in the spot market, and on time charters. Our vessels are technically managed by Scorpio Ship Management S.A.M. (“SSM”), which is majority owned by the Lolli-Ghetti family. SSM facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services necessary to operate the vessels such as drydocks and vetting/inspection under a technical management agreement. We also have an administrative services agreement with Scorpio Services Holding Limited (“SSH”), which is majority owned by the Lolli-Ghetti family. The administrative services provided under this agreement primarily include accounting, legal compliance, financial, information technology services, and the provision of administrative staff and office space, which are contracted to subsidiaries of SSH. We pay our managers fees for these services and reimburse them for direct or indirect expenses that they incur in providing these services. Basis of accounting The consolidated financial statements incorporate the financial statements of Scorpio Tankers Inc. and its subsidiaries. The consolidated financial statements have been presented in United States dollars (USD or $), which is the functional currency of Scorpio Tankers Inc. and all its subsidiaries and have been authorized for issue by the Board of Directors on March 18, 2016. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board and on a historical cost basis, except for the revaluation of certain financial instruments. All inter-company transactions, balances, income and expenses were eliminated on consolidation. Going concern The financial statements have been prepared in accordance with the going concern basis of accounting as described further in the “Liquidity risk” section of Note 22. Significant Accounting Policies Revenue recognition Vessel revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, and other sales-related or value added taxes. Vessel revenue is comprised of time charter revenue, voyage revenue, and pool revenue. (1) Time charter revenue is recognized as services are performed based on the daily rates specified in the time charter contract. F-9 (2) Voyage charter agreements are charter hires, where a contract is made in the spot market for the use of a vessel for a specific voyage for a specified charter rate. Revenue from voyage charter agreements is recognized as voyage revenue on a pro-rata basis over the duration of the voyage on a discharge to discharge basis. In the application of this policy, we do not begin recognizing revenue until (i) the amount of revenue can be measured reliably, (ii) it is probable that the economic benefits associated with the transaction will flow to the entity, (iii) the transactions stage of completion at the balance sheet date can be measured reliably and (iv) the costs incurred and the costs to complete the transaction can be measured reliably. (3) Pool revenue for each vessel is determined in accordance with the profit sharing terms specified within each pool agreement. In particular, the pool manager aggregates the revenues and expenses of all of the pool participants and distributes the net earnings to participants based on: • • the pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into consideration); and the number of days the vessel participated in the pool in the period. We recognize pool revenue on a monthly basis, when the vessel has participated in a pool during the period and the amount of pool revenue for the month can be estimated reliably. We receive estimated vessel earnings based on the known number of days the vessel has participated in the pool, the contract terms, and the estimated monthly pool revenue. On a quarterly basis, we receive a report from the pool which identifies the number of days the vessel participated in the pool, the total pool points for the period, the total pool revenue for the period, and the calculated share of pool revenue for the vessel. We review the quarterly report for consistency with each vessel’s pool agreement and vessel management records. The estimated pool revenue is reconciled quarterly, coinciding with our external reporting periods, to the actual pool revenue earned, per the pool report. Consequently, in our financial statements, reported revenues represent actual pooled revenues. While differences do arise in the performance of these quarterly reconciliations, such differences are not material to total reported revenues. Acquired time charter contracts When a time charter contract is acquired along with a vessel, the cost of the acquisition is determined based on the relative fair values of each element acquired. Amortization expense is recognized on a straight line basis over the useful life of the asset, which has been determined to be the remaining contract life at the date of acquisition. The useful life and amortization method are reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense related to the assets is recognized as an offset to revenue, and the book value of the acquired contract is stated at the cost of the contract less accumulated amortization. Voyage expenses Voyage expenses, which primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions paid by us under voyage charters are expensed ratably over the estimated length of each voyage, which can be allocated between reporting periods based on the timing of the voyage. The impact of recognizing voyage expenses ratably over the length of each voyage is not materially different on a quarterly and annual basis from a method of recognizing such costs as incurred. Consistent with our revenue recognition for voyage charters, voyage expenses are calculated on a discharge-to-discharge basis. The procurement of these services is managed on our behalf by our commercial manager, SCM (see Note 15). Vessel operating costs Vessel operating costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical management fees, are expensed as incurred. The procurement of these services is managed on our behalf by our technical manager, SSM (see Note 15). Earnings per share Basic earnings per share is calculated by dividing net income attributable to equity holders of the parent by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by adjusting the net income attributable to equity holders of the parent and the weighted average number of common shares used for calculating basic per F-10 share for the effects of all potentially dilutive shares. Such dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share. In the years ended December 31, 2015, 2014 and 2013, there were dilutive items as a result of our Equity Incentive Plans (see Note 14). In the year ended December 31, 2015, there were dilutive items as a result of the potential dilutive impact of our convertible senior notes due 2019 (the “Convertible Notes”) which were issued in June 2014 (as further described in Note 11). We apply the if-converted method when determining diluted earnings per share. This requires the assumption that all potential ordinary shares have been converted into ordinary shares at the beginning of the period or, if not in existence at the beginning of the period, the date of the issue of the financial instrument or the granting of the rights by which they are granted. Under this method, once potential ordinary shares are converted into ordinary shares during the period, the dividends, interest and other expense associated with those potential ordinary shares will no longer be incurred. The effect of conversion, therefore, is to increase income (or reduce losses) attributable to ordinary equity holders as well as the number of shares in issue. Conversion will not be assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive. Potentially dilutive shares related to the Convertible Notes were excluded from the composition of diluted earnings per share for the year ended December 31, 2014 because their effect would have been anti-dilutive under the if- converted method. Charterhire expense Charterhire expense is the amount we pay to vessel owners to time charter-in vessels. The amount is usually for a fixed period of time at rates that are generally fixed, but may contain a variable component based on inflation, interest rates, profit sharing or current market rates. The vessel’s owner is responsible for crewing and other vessel operating costs. Charterhire expense is recognized ratably over the charterhire period. Operating leases Costs in respect of operating leases are charged to the consolidated statement of income on a straight line basis over the lease term. Foreign currencies The individual financial statements of Scorpio Tankers Inc. and each of its subsidiaries are presented in the currency of the primary economic environment in which we operate (its functional currency), which in all cases is U.S. dollars. For the purpose of the consolidated financial statements, our results and financial position are also expressed in U.S. dollars. In preparing the financial statements of Scorpio Tankers Inc. and each of its subsidiaries, transactions in currencies other than the U.S. dollar are recorded at the rate of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in other currencies are retranslated into the functional currency at rates ruling at that date. All resultant exchange differences have been recognized in the consolidated statements of income. The amounts charged to the consolidated statements of income during the years ended December 31, 2015, 2014 and 2013 were not material. Segment reporting During the years ended December 31, 2015, 2014 and 2013, we owned or chartered-in vessels spanning four different vessel classes, Handymax, MR, Panamax/LR1, and Aframax/LR2, all of which earn revenues in the seaborne transportation of refined petroleum products in the international shipping markets. Each vessel within its respective class qualifies as an operating segment under IFRS. However, each vessel also exhibits similar long-term financial performance and similar economic characteristics to the other vessels within the respective vessel class, thereby meeting the aggregation criteria in IFRS. We have therefore chosen to present our segment information by vessel class using the aggregated information from the individual vessels. Segment results are evaluated based on reported income or loss from each segment. The accounting policies applied to the reportable segments are the same as those used in the preparation of our consolidated financial statements. It is not practical to report revenue or non-current assets on a geographical basis due to the international nature of the shipping market. F-11 Vessels held for sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When we have committed to a sale plan involving the loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former subsidiary after the sale. Vessels under construction As of December 31, 2015 and 2014, we had 12 and 24 vessels under construction, respectively. Vessels under construction are measured at cost and include costs incurred that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. These costs include installment payments made to the shipyards, directly attributable financing costs, professional fees and other costs deemed directly attributable to the construction of the asset. Vessels and drydock Our fleet is measured at cost, which includes directly attributable financing costs and the cost of work undertaken to enhance the capabilities of the vessels, less accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis to the estimated residual value over the anticipated useful life of the vessel from date of delivery. Vessels under construction are not depreciated until such time as they are ready for use. The residual value is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration the historical four year average scrap market rates available at the balance sheet date with changes accounted for in the period of change and in future periods. The vessels are required to undergo planned drydocks for replacement of certain components, major repairs and maintenance of other components, which cannot be carried out while the vessels are operating, approximately every 30 months or 60 months depending on the nature of work and external requirements. These drydock costs are capitalized and depreciated on a straight-line basis over the estimated period until the next drydock. In deferred drydocking, we only include direct costs that are incurred as part of the drydocking to meet regulatory requirements, or are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard. Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not, are expensed as incurred. For an acquired or newly built vessel, a notional drydock component is allocated from the vessel’s cost. The notional drydock cost is estimated by us, based on the expected costs related to the next drydock, which is based on experience and past history of similar vessels, and carried separately from the cost of the vessel. Subsequent drydocks are recorded at actual cost incurred. The drydock component is depreciated on a straight-line basis to the next estimated drydock. The estimated amortization period for a drydock is based on the estimated period between drydocks. When the drydock expenditure is incurred prior to the expiry of the period, the remaining balance is expensed. Impairment of vessels, drydock and vessels under construction At each balance sheet date, we review the carrying amount of our vessels and drydock and vessels under construction to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the vessels and drydock and vessels under construction is estimated in order to determine the extent of the impairment loss (if any). We treat each vessel and the related drydock as a cash generating unit. Recoverable amount is the higher of the fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. F-12 If the recoverable amount of the cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the cash generating unit in the prior years. A reversal of impairment is recognized as income immediately. Inventories Inventories consist of lubricating oils and other items including stock provisions, and are stated at the lower of cost and net realizable value. Cost is determined using the first in first out method. Stores and spares are charged to vessel operating costs when purchased. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. To the extent that variable rate borrowings are used to finance a qualifying asset and are hedged in an effective cash flow hedge of interest rate risk, the effective portion of the derivative is recognized in other comprehensive income and released to income or loss when the qualifying asset impacts income or loss. To the extent that fixed rate borrowings are used to finance a qualifying asset and are hedged in an effective fair value hedge of interest rate risk, the capitalized borrowing costs reflect the hedged interest rate. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in the consolidated statement of income in the period in which they are incurred. Equity method investments We use the equity method to account for investments in associates over which we otherwise have significant influence (generally defined as investments in companies that correspond to holdings of between 20% and 50% of voting shares). Under the equity method, the investment is initially recognized at cost, and this amount will be adjusted in each subsequent period for the Company’s share of income or loss (adjusted for any fair value adjustments made upon initial recognition) and reduced by any distributions received. Investments in associates include goodwill identified on acquisition, if applicable. We consider investments in associates for impairment testing whenever there is a quoted share price and when this has a fair value less than the carrying value per share for the investment. For unquoted investments in associates, the company’s recent financial information is taken into account to assess whether impairment testing is necessary. In a situation in which, based on the quoted share price, the fair value less cost to sell is considered to be below the carrying amount, the value in use is determined in order to test the investment for impairment. If the value in use is also below the carrying amount, an impairment loss is recognized for the difference between carrying amount and the higher of “value in use” or “fair value less costs to sell”. We accounted for our investment in Dorian LPG Ltd. (“Dorian”) under the equity method from the date of our initial investment in November 2013 through October 29, 2014, the date we lost significant influence over Dorian’s financial and operating policy decisions. Subsequent to that date, we accounted for this investment as an available for sale financial asset. This investment was sold in July 2015 as further described in Note 8. Financial instruments Financial assets and financial liabilities are recognized in our balance sheet when we become a party to the contractual provisions of the instrument. F-13 Financial assets All financial assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (FVTPL), “available-for-sale” and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is held for trading. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or it is a part of an identified portfolio of financial instruments that we manage together and has a recent actual pattern of short-term profit-taking; or • • • it is a derivative that is not designated and effective as a hedging instrument. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in the statement of income or loss. The net gain or loss recognized in income or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 22. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified as “loans and receivables,” “held-to-maturity” or financial assets at fair value through profit or loss. Available- for-sale financial assets are recognized initially at fair value. Subsequent to initial recognition, any change in fair value is recorded in other comprehensive income. Any dividends received or impairment losses are recorded directly in income or loss. Upon the sale of the assets, the difference between the carrying amount and the sum of (i) the consideration received and (ii) any cumulative gain / loss that had been recognized in other comprehensive income will be recognized in the statement of income or loss. Available for sale financial assets consisted of our investment in Dorian during the years ending December 31, 2015 and 2014. This investment was sold in July 2015 as further described in Note 8. Loans and receivables Amounts due from the Scorpio Group Pools and other receivables that have fixed or determinable payments and are not quoted in an active market are classified as accounts receivable. Accounts receivable are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment of financial assets could include: • significant financial difficulty of the issuer or counterparty; or • default or delinquency in interest or principal payments; or • it becomes probable that the borrower will enter bankruptcy or financial re-organization. F-14 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly-liquid investments with original maturities of three months or less, that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. Financial liabilities Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is held for trading, using the criteria set out above for financial assets. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognized in the statement of income or loss. The net gain or loss recognized in the statement of income or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note 22. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset and a financial liability. It allocates interest income and interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash flows (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) over the expected life of the financial asset and financial liability, or, where appropriate, a shorter period. Convertible debt instruments In June 2014, we completed an offering for $360.0 million in aggregate principal amount the Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities’ Act of 1933 (as further described in Note 11). Under International Accounting Standard 32 (‘IAS 32’), we must separately account for the liability and equity components of convertible debt instruments (such as the Convertible Notes) in a manner that reflects the issuer’s economic interest cost. Under this methodology, the instrument is split between its liability and equity components upon initial recognition. The fair value of the liability is measured first, by estimating the fair value of a similar liability that does not have any associated equity conversion option. This becomes the liability’s carrying amount at initial recognition, which is recorded as part of Debt on the consolidated balance sheet. The equity component (the conversion feature) is assigned the residual amount after deducting the amount separately determined for the liability component from the fair value of the instrument as a whole and is recorded as part of additional paid-in capital within stockholders’ equity on the consolidated balance sheet. Issuance costs are allocated proportionately between the liability and equity components. The value of the equity component is treated as an original issue discount for purposes of accounting for the liability component of the Convertible Notes. Accordingly, we are required to record non-cash interest expense as a result of the amortization of the discounted carrying value of the Convertible Notes to their face amount over the term of the Convertible Notes. IAS 32 therefore requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest. Derivative financial instruments Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. The resulting gain or loss is recognized in income or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in income or loss depends on the nature of the hedging relationship. During the years ended December 31, 2015, 2014 and 2013, we designated certain derivatives as hedges of highly probable forecast transactions (cash flow hedges) as described further below. F-15 A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months, and it is not expected to be realized or settled within 12 months. Our derivative financial instruments for the years ended December 31, 2015, 2014 and 2013 consisted of interest rate swaps and profit or loss sharing arrangements on time chartered-in vessels with third parties. See Note 12 for further description of these instruments. Hedge accounting for cash flow hedges Our policy is to designate certain hedging instruments, which can include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. At the inception of the hedge relationship, we document the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, we document whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item. Derivative financial instruments are initially recognized in the balance sheet at fair value at the date the derivative contract is entered into and are subsequently measured at their fair value as derivative assets or derivative liabilities, respectively. Changes in fair value of derivative financial instruments, which are designated as cash flow hedges and deemed to be effective, are recognized directly in other comprehensive income. Changes in fair value of a portion of a hedge deemed to be ineffective are recognized in income or loss. Hedge effectiveness is measured quarterly. Amounts previously recognized in other comprehensive income or loss are reclassified to income or loss in the periods when the hedged item is recognized in income or loss, in the same line of the statement of income or loss as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. Hedge accounting is discontinued when we revoke the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income or loss at that time is accumulated and recognized when the forecast transaction is ultimately recognized in income or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in other comprehensive income or loss is recognized immediately in the statement of income or loss. For the years ended December 31, 2015, 2014, and 2013, we were party to derivative financial instruments to manage our exposure to interest rate fluctuations on our 2011 Credit Facility and 2010 Revolving Credit Facility. The interest rate swaps relating to the 2011 Credit Facility were designated and accounted for as cash flow hedges, and the interest rate swaps relating to the 2010 Revolving Credit Facility were designated at fair value through profit or loss for the years ended December 31, 2015, 2014 and 2013. The interest rate swaps under our 2010 Revolving Credit Facility were terminated in March 2015 and the interest rate swaps under our 2011 Credit Facility expired in June 2015 as further described in Note 12. Finance Lease In July 2015, we reached an agreement to purchase an LR2 product tanker that was then under construction at Daewoo Shipbuilding and Marine Engineering (“DSME”) for a purchase price of $59.0 million. As part of this agreement, we agreed to bareboat charter-in the vessel for up to nine months at $10,000 per day with a purchase obligation at the conclusion of the bareboat charter (or at any point prior, at our discretion). This transaction is further described in Note 11. This bareboat charter-in agreement is being accounted for as a finance lease. Finance leases are recognized as an asset and as a liability in the amount equal to the fair market value of the leased vessel or if lower, the present value of the minimum lease payments. Any initial direct costs to us are added to the amount recognized as an asset. The bareboat charter payments are being allocated between the finance charge and the reduction of the outstanding liability. The interest element of the bareboat charter payment is being recorded within “Financial Expenses” on the consolidated statements of income. The vessel is being depreciated over its estimated useful life of 25 years. Equity instruments An equity instrument is any contract that evidences a residual interest in our assets after deducting all of its liabilities. Equity instruments issued by us are recorded at the proceeds received, net of direct issue costs. F-16 We had 175,335,400 and 164,574,542 registered shares authorized, issued and outstanding with a par value of $0.01 per share at December 31, 2015 and December 31, 2014, respectively. These shares provide the holders with the same rights to dividends and voting rights. Provisions Provisions are recognized when we have a present obligation as a result of a past event, and it is probable that we will be required to settle that obligation. Provisions are measured at our best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Dividends A provision for dividends payable is recognized when the dividend has been declared in accordance with the terms of the shareholder agreement. Dividends per share presented in these consolidated financial statements are calculated by dividing the aggregate dividends declared by all of our subsidiaries by the number of our shares assuming these shares have been outstanding throughout the periods presented. Restricted stock The restricted stock awards granted under our equity incentive plans as described in Note 14 contain only service conditions and are classified as equity settled. Accordingly, the fair value of our restricted stock awards was calculated by multiplying the average of the high and low share price on the grant date and the number of restricted stock shares granted that are expected to vest. In accordance with IFRS 2 “Share Based Payment,” the share price at the grant date serves as a proxy for the fair value of services to be provided by the individual under the plan. Compensation expense related to the awards is recognized ratably over the vesting period, based on our estimate of the number of awards that will eventually vest. The vesting period is the period during which an individual is required to provide service in exchange for an award and is updated at each balance sheet date to reflect any revisions in estimates of the number of awards expected to vest as a result of the effect of service vesting conditions. The impact of the revision of the original estimate, if any, is recognized in the consolidated statement of income or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves. Critical accounting judgments and key sources of estimation uncertainty In the application of the accounting policies, we are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant judgments and estimates are as follows: Revenue recognition Our revenue is primarily generated from time charters, spot voyages, or pools (see Note 16 for the components of our revenue generated during the years ended December 31, 2015, 2014 and 2013). Revenue recognition for time charters and pools is generally not as complex or as subjective as voyage charters (spot voyages). Time charters are for a specific period of time at a specific rate per day. For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter. Pool revenues are determined by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set out in the pool agreement. We generated revenue from spot voyages during the years ended December 31, 2015, 2014 and 2013. Within the shipping industry, there are two methods used to account for spot voyage revenue: (1) ratably over the estimated length of each voyage or (2) completed voyage. The recognition of voyage revenues ratably over the estimated length of each voyage is the most prevalent method of accounting for voyage revenues and the method used by us. Under each method, voyages may be calculated on either a load-to-load or discharge-to-discharge basis. In applying our revenue recognition method, we F-17 believe that the discharge-to-discharge basis of calculating voyages more accurately estimates voyage results than the load- to-load basis. In the application of this policy, we do not begin recognizing revenue until (i) the amount of revenue can be measured reliably, (ii) it is probable that the economic benefits associated with the transaction will flow to the entity, (iii) the transactions stage of completion at the balance sheet date can be measured reliably and (iv) the costs incurred and the costs to complete the transaction can be measured reliably. Vessel impairment We evaluate the carrying amounts of our vessels and vessels under construction to determine whether there is any indication that those vessels have suffered an impairment loss. If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires us to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these items have been historically volatile. As part of our process of assessing fair value less costs to sell of the vessel, we obtain vessel valuations for our operating vessels from leading, independent and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be impaired. We generally do not obtain vessel valuations for vessels under construction. If an indication of impairment is identified, the need for recognizing an impairment loss is assessed by comparing the carrying amount of the vessels to the higher of the fair value less costs to sell and the value in use. Likewise, if there is an indication that an impairment loss recognized in prior periods no longer exists or may have decreased, the need for recognizing an impairment reversal is assessed by comparing the carrying amount of the vessels to the latest estimate of recoverable amount. For the period ended December 31, 2015, we reviewed the carrying amount of our vessels to determine whether there was an indication that these assets had suffered an impairment. First, we compared the carrying amount of our vessels to their fair values less costs to sell (determined by taking into consideration two independent broker valuations). If the carrying amount of our vessels was greater than the fair values less costs to sell, we prepared a value in use calculation where we estimated the vessel’s future cash flows based on a combination of the latest, published, forecast time charter rates for the next three years, a growth rate of 3.0% in freight rates in each period thereafter and our best estimates of vessel operating expenses and drydock costs. These cash flows were then discounted to their present value, using a pre-tax discount rate of 8.54%. At December 31, 2015, we had 80 vessels in our fleet (including STI Lombard, which is bareboat chartered-in under a finance lease arrangement) and 12 vessels under construction: • 50 vessels had fair values less costs to sell in excess of their carrying amount. • 30 vessels had fair values less costs to sell less than their carrying amount. We prepared a value in use calculation for each these vessels which resulted in no impairment being recognized. • We did not obtain independent broker valuations for our 12 vessels under construction. To assess their carrying values for impairment, we prepared value in use calculations which resulted in no impairment being recognized. Vessel lives and residual value The carrying value of each of our vessels represents its original cost at the time it was delivered or purchased less depreciation and impairment. We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives of 25 years. The estimated useful life of 25 years is management’s best estimate and is also consistent with industry practice for similar vessels. The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value per ton. The scrap value per ton is estimated taking into consideration the historical four year scrap market rate average at the balance sheet date. An increase in the estimated useful life of a vessel or in its scrap value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or scrap value would have the effect of increasing the annual depreciation charge. F-18 When regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel’s useful life is adjusted to end at the date such regulations become effective. No such regulations have been identified that would have impacted the estimated useful life of our vessels. The estimated salvage value of the vessels may not represent the fair market value at any one time since market prices of scrap values tend to fluctuate. Deferred drydock cost We recognize drydock costs as a separate component of each vessel’s carrying amount and amortize the drydock cost on a straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between drydocks performed, which can result in adjustments to the estimated amortization of the drydock expense. If the vessel is disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain or loss recognized upon disposal of vessels in the period when contracted. We expect that our vessels will be required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and supplies used in making such repairs. Adoption of new and amended IFRS and IFRIC interpretations from January 1, 2015 Standards and interpretations adopted during the period • Amendment to IAS 19 - Employee benefits: Employee contributions • Annual improvement 2010-2012 • Annual improvement 2011-2013 The adoption of these standards did not have a material impact on these consolidated financial statements. Standards and Interpretations issued not yet adopted At the date of authorization of these consolidated financial statements, the following Standards which have not been applied in these consolidated financial statements were issued but not yet effective: • Amendment to IAS 16 & IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortization • Amendment to IAS 16 & IAS 41 - Agriculture: Bearer Plants • Amendment to IAS 27 - Equity Method in Separate Financial Statements • Amendment to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture • Amendment to IFRS 11 - Joint arrangements • Amendment to IAS 1 - Disclosure Initiative • Amendment to IFRS 10, IFRS 12 and IAS 28 - Investment entities: Applying the Consolidation Exception • Annual improvement 2012-2014 • IFRS 9 - Financial Instruments • IFRS 14 - Regulatory deferral accounts We do not expect that the adoption of these standards in future periods will have a material impact on our financial statements. Recent Accounting Pronouncements IFRS 15, Revenue from Contracts with Customers, was issued by the International Accounting Standards Board on May 28, 2014. IFRS 15 amends the existing accounting standards for revenue recognition and is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products or services are transferred to F-19 customers. IFRS 15 applies to an entity’s first annual IFRS financial statements for a period beginning on or after January 1, 2018. Early adoption is permitted and the standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. We are currently evaluating the impact of adopting the new revenue standard on our consolidated financial statements. IFRS 16, Leases, was issued by the International Accounting Standards Board on January 13, 2016. IFRS 16 amends the existing accounting standards to require lessees to recognize the rights and obligations created by leases as assets and liabilities on the balance sheet, unless the term of the lease is 12 months or less. The accounting for leases by lessors remains substantially unchanged from the existing standard under IAS 17. IFRS 16 applies to an entity’s first annual IFRS financial statements for a period beginning on or after January 1, 2019. Early adoption is permitted if IFRS 15, Revenue from Contracts with Customers, has been adopted. We are currently evaluating the impact of adopting the new leasing standard on our consolidated financial statements. 2. Cash and cash equivalents The following table depicts the components of our cash as of December 31, 2015 and 2014: In thousands of U.S. dollars Cash at banks ......................................................................................................................... Cash on vessels ...................................................................................................................... At December 31, 2015 200,187 783 200,970 $ $ 2014 $ 115,695 448 $ 116,143 3. Accounts receivable The following table depicts the components of our accounts receivable as of December 31, 2015 and 2014: In thousands of U.S. dollars Scorpio MR Pool Limited ..................................................................................................... Scorpio LR2 Pool Limited .................................................................................................... Scorpio Panamax Tanker Pool Limited ................................................................................ Scorpio Handymax Tanker Pool Limited ............................................................................. Receivables from the Scorpio Group Pools .......................................................................... Scorpio Ship Management S.A.M. (SSM) ............................................................................ Receivables related to vessels under construction ................................................................ Freight and time charter receivables ..................................................................................... Insurance receivables ............................................................................................................ Other receivables .................................................................................................................. At December 31, 2015 2014 $ $ 35,238 15,301 4,459 4,477 59,475 2,346 — 498 3,012 3,686 69,017 $ $ 28,289 22,326 11,846 11,664 74,125 — 1,647 724 245 1,460 78,201 Scorpio MR Pool Limited, Scorpio LR2 Pool Limited, Scorpio Panamax Tanker Pool Limited, Scorpio Handymax Tanker Pool Limited and Scorpio Ship Management S.A.M. (“SSM”) are related parties, as described in Note 15. Amounts due from the pools relate to income receivables and receivables for working capital contributions which are expected to be collected within one year. Amounts due from SSM relate to advances made for vessel operating expenses (such as crew wages) that will either be reimbursed or applied against future costs. Receivables related to vessels under construction at December 31, 2014 relate to the difference between the drawdown amounts from our secured credit facilities and the final installment payments due for the deliveries of STI Tribeca, STI Rotherhithe, STI Hammersmith and STI Rose. These drawdowns occurred in December 2014 however the funds were not released until January 2015, when the vessels were delivered. Freight and time charter receivables represent amounts collectible from customers for our vessels operating in the spot market or on time charter. Insurance receivables primarily represent amounts collectible on our insurance policies in relation to vessel repairs. F-20 We consider that the carrying amount of accounts receivable approximates their fair value due to the short maturity thereof. Accounts receivable are non-interest bearing. At December 31, 2015 and December 31, 2014, no material receivable balances were either past due or impaired. 4. Vessels Operating vessels and drydock In thousands of U.S. dollars Cost Vessels Drydock Total As of January 1, 2015 ................................................................ Additions (1) ................................................................................ Sale of vessel (2) .......................................................................... As of December 31, 2015 .......................................................... $ 1,992,229 1,221,361 (25,223) 3,188,367 $ 41,012 21,838 (811) 62,039 $ 2,033,241 1,243,199 (26,034) 3,250,406 Accumulated depreciation and impairment As of January 1, 2015 ................................................................ Charge for the period ................................................................. Loss on vessel sold (3) ................................................................. Sale of vessel (2) .......................................................................... As of December 31, 2015 .......................................................... (54,928) (96,390) (2,054) 7,309 (146,063) (6,435) (10,966) — 811 (16,590) (61,363) (107,356) (2,054) 8,120 (162,653) Net book value As of December 31, 2015 .......................................................... $ 3,042,304 $ 45,449 $ 3,087,753 Cost As of January 1, 2014 ................................................................ Additions (4) ................................................................................ Transfer to vessels held for sale (5) ............................................. As of December 31, 2014 .......................................................... $ 566,583 1,515,888 (90,242) 1,992,229 $ 12,102 31,200 (2,290) 41,012 $ 578,685 1,547,088 (92,532) 2,033,241 Accumulated depreciation and impairment As of January 1, 2014 ................................................................ Charge for the period ................................................................. Write-offs of vessels held for sale (6) .......................................... Transfer to vessels held for sale (5) ............................................. As of December 31, 2014 .......................................................... (45,021) (37,880) (3,276) 31,249 (54,928) (3,394) (4,737) (702) 2,398 (6,435) (48,415) (42,617) (3,978) 33,647 (61,363) Net book value As of December 31, 2014 .......................................................... $ 1,937,301 $ 34,577 $ 1,971,878 (1) Additions in 2015 primarily relate to the deliveries of 27 vessels and corresponding calculations of notional drydock on these vessels. (2) Represents the net book value of STI Highlander, which was sold in October 2015. (3) Represents the loss recorded upon the sale of STI Highlander in October 2015. (4) Additions in 2014 primarily relate to the deliveries of 41 newbuilding vessels and corresponding calculations of notional drydock on these vessels. (5) Represents the reclassification of the net book value of STI Heritage and STI Harmony from “Vessels” to “Vessels Held for Sale” in December 2014. (6) Represents the write-off to remeasure STI Heritage, STI Harmony and Venice at the lower of their carrying amount and fair value less costs to sell at December 31, 2014. These vessels were sold during the year ended December 31, 2015 as described below. F-21 Vessel deliveries We took delivery of the following vessels during the year ended December 31, 2015 resulting in an increase of $1,243.2 million in Vessels from December 31, 2014: Name STI Tribeca..................... 1 STI Hammersmith .......... 2 STI Rotherhithe .............. 3 STI Rose ......................... 4 STI Gramercy ................. 5 STI Veneto ..................... 6 STI Alexis ...................... 7 STI Bronx ....................... 8 STI Pontiac ..................... 9 10 STI Manhattan ................ 11 STI Winnie ..................... 12 STI Oxford ..................... 13 STI Queens ..................... 14 STI Osceola .................... 15 STI Lauren ..................... 16 STI Connaught ............... 17 STI Notting Hill ............. 18 STI Spiga ........................ 19 STI Seneca ..................... 20 STI Savile Row .............. 21 STI Westminster ............. 22 STI Brooklyn .................. 23 STI Kingsway ................. 24 STI Memphis .................. 25 STI Lombard .................. 26 STI Carnaby ................... 27 STI Black Hawk ............. Month Delivered January 2015 January 2015 January 2015 January 2015 January 2015 February 2015 February 2015 February 2015 March 2015 March 2015 March 2015 April 2015 April 2015 April 2015 May 2015 May 2015 May 2015 June 2015 June 2015 June 2015 June 2015 July 2015 August 2015 August 2015 August 2015 September 2015 September 2015 Vessel Type MR Handymax Handymax LR2 MR LR2 LR2 MR MR MR LR2 LR2 MR MR LR2 LR2 MR LR2 MR LR2 MR MR LR2 MR LR2 LR2 MR (1) (1) STI Lombard was delivered in August 2015 under a bareboat charter-in agreement for up to nine months at $10,000 per day. We have the obligation to purchase the vessel at the conclusion of the bareboat charter (or at any point prior, at the Company’s discretion). Vessel Held for Sale and Vessel Sales In December 2013, we designated Noemi, Senatore, Venice and STI Spirit as held for sale. As part of this designation, we recorded a $21.2 million write-down to remeasure these vessels at the lower of their carrying amount and fair value less estimated costs to sell. Their revised carrying amount of $82.6 million was then reclassified from “Vessels” to “Vessels held for sale” on the consolidated balance sheet as of December 31, 2013. In March and April 2014, we sold Noemi and Senatore, respectively for aggregate net proceeds of $42.5 million which resulted in the commensurate reduction in “Vessels held for sale.” As part of these sales, we repaid $22.5 million on our 2010 Revolving Credit Facility in March 2014 and wrote-off a total of $0.2 million of deferred financing fees. In April 2014, we sold STI Spirit for net proceeds of $29.5 million which resulted in the commensurate reduction in “Vessels held for sale.” As part of this sale, we repaid $21.4 million on our STI Spirit Credit Facility in April 2014 and wrote-off $0.3 million of deferred financing fees. In April 2014, Venice incurred $1.3 million of drydock costs that were capitalized as part of the carrying amount of that vessel as of December 31, 2014. In December 2014, we designated STI Heritage and STI Harmony as held for sale and recorded a $3.9 million write- down to remeasure these vessels at their fair value less estimated costs to sell. Their revised aggregate carrying amount of $59.0 million was then reclassified from “Vessels” to “Vessels held for sale” on the consolidated balance sheet as of F-22 December 31, 2014. Fair value was determined by taking into consideration agreements to sell these vessels, which were supported by two independent broker valuations. These independent broker valuations were based on each broker’s knowledge of current sale and purchase market conditions and take into consideration vessel age, size, the shipyard where it was built and any other specifications unique to such vessel (such as ice class capabilities). As such, we considered these values to be within Level 2 of the fair value hierarchy under IFRS 13. In March 2015, we sold Venice to an unrelated third-party for net proceeds of $12.6 million. As a result of this sale, we recognized a gain of $0.7 million, repaid $6.1 million into our 2010 Credit Facility and wrote-off $4,850 of deferred financing fees. In April 2015, we sold STI Heritage and STI Harmony to an unrelated third-party for aggregate net proceeds of $60.3 million and recorded an aggregate gain of $1.3 million. This gain relates to lower than expected closing costs incurred relating to the closing of the sales of each vessel. As a result of these sales, we made an aggregate repayment of $25.6 million into our 2010 Revolving Credit Facility and wrote-off a total of $21,564 of deferred financing fees. In October 2015, we sold STI Highlander for net proceeds of $17.9 million and recognized a loss of $2.1 million. There was no debt repayment and no write-off of deferred financing fees from this transaction as this vessel was not collateralized under any of our credit facilities at the time of sale. Collateral agreements The following table represents vessels provided as collateral under our secured loan agreements (which are described in Note 11) as of December 31, 2015: Credit Facility 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2011 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... 2013 Credit Facility ........................... ABN AMRO Credit Facility .............. ABN AMRO Credit Facility .............. ABN AMRO Credit Facility .............. Vessel Name STI Onyx STI Sapphire STI Emerald STI Beryl STI Le Rocher STI Larvotto STI Duchessa STI Wembley STI Fontvieille STI Ville STI Opera STI Texas City STI Meraux STI San Antonio STI Venere STI Virtus STI Aqua STI Dama STI Mythos STI Benicia STI Regina STI St. Charles STI Yorkville STI Milwaukee STI Battery STI Osceola STI Seneca STI Rose STI Alexis STI Spiga STI Savile Row STI Kingsway F-23 Net Book Value (In millions of U.S. dollars) $ 34.3 34.1 34.0 33.2 33.7 33.7 32.2 31.5 33.7 34.0 32.0 36.4 36.8 36.9 32.0 32.1 32.3 32.3 32.0 37.7 32.5 36.3 32.9 38.9 33.1 39.3 39.4 59.1 59.3 58.3 59.5 59.8 Credit Facility ABN AMRO Credit Facility .............. BNP Paribas Credit Facility ............... ING Credit Facility ............................ ING Credit Facility ............................ KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KEXIM Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... KSURE Credit Facility ...................... Newbuilding Credit Facility .............. Newbuilding Credit Facility .............. Newbuilding Credit Facility .............. Newbuilding Credit Facility .............. Vessel Name STI Carnaby STI Memphis STI Black Hawk STI Pontiac STI Brixton STI Comandante STI Pimlico STI Hackney STI Acton STI Fulham STI Camden STI Finchley STI Clapham STI Poplar STI Elysees STI Madison STI Park STI Orchard STI Sloane STI Broadway STI Condotti STI Veneto STI Battersea STI Hammersmith STI Rotherhithe STI Chelsea STI Lexington STI Powai STI Olivia STI Mayfair STI Soho STI Tribeca STI Gramercy STI Bronx STI Manhattan STI Queens STI Notting Hill STI Westminster STI Brooklyn STI Winnie STI Oxford STI Lauren STI Connaught STI Amber STI Topaz STI Ruby STI Garnet Net Book Value (In millions of U.S. dollars) 60.0 37.1 37.5 38.9 30.9 30.7 31.0 30.9 31.5 31.2 31.1 31.4 31.7 31.7 50.1 50.4 50.4 50.0 50.9 49.9 50.9 51.1 31.2 32.1 32.2 32.2 32.2 32.2 32.3 33.5 33.0 34.0 33.2 34.0 33.9 33.9 37.7 37.9 34.1 52.1 52.3 52.3 52.0 34.0 34.1 34.2 34.3 3,027.5 $ F-24 5. Vessels under construction 2014 Activity In March 2014, we sold seven VLCCs under construction to an unrelated third party. As a result of the sale, we received net proceeds of $141.7 million in cash, and recorded a gain of $51.4 million. The book value of these assets at the time of sale was $90.3 million. In May 2014, we paid additional cash consideration of $4.7 million to the counterparties of the 2013 transaction to acquire four MR product tankers in exchange for 3,611,809 of our common shares based on subsequent changes to our share price. This one-time adjustment was recorded against additional paid-in capital. In August 2014, we reached an agreement with an unrelated third party to purchase an MR product tanker that was then under construction, STI St. Charles. The purchase price was $37.1 million and we took delivery of this vessel in September 2014. In November 2014, we reached an agreement with an unrelated third party to purchase two LR2 product tankers that were then under construction at Daehan Shipbuilding Company (“DHSC”) for approximately $60.0 million each. These vessels, STI Rose and STI Alexis, were delivered in January and February 2015, respectively. In December 2014, we reached an agreement with Scorpio Bulkers Inc., or Scorpio Bulkers, a related party, to purchase newbuilding contracts for four LR2 product tankers under construction at DHSC and Sungdong Shipbuilding & Marine Engineering (“SSME”) and options to purchase two additional LR2 newbuilding contracts which expired unexercised in May 2015. The purchase price for each of the four LR2 newbuilding contracts was $51.0 million with deliveries scheduled throughout 2016 (one per quarter). This transaction closed in July 2015. The independent members of our Board of Directors unanimously approved this transaction with Scorpio Bulkers. 2015 Activity In May 2015, we reached agreements with two unrelated third parties to purchase an aggregate of four LR2 product tankers, which were under construction at SSME and DHSC, for $60.0 million each. STI Spiga and STI Savile Row were delivered in June 2015 and STI Kingsway and STI Carnaby were delivered in August and September 2015, respectively. In July 2015, we reached an agreement with an unrelated third party to purchase an MR product tanker, which was built in 2014 at SPP Shipbuilding Co. Ltd. (“SPP”), for $37.1 million. This vessel, STI Memphis, was delivered in August 2015. In July 2015, we reached an agreement to purchase an LR2 product tanker, which was under construction at DSME, for $59.0 million. As part of this agreement, we agreed to make a deposit of $5.9 million and to bareboat charter-in the vessel for up to nine months at $10,000 per day. We are obligated to take ownership of the vessel and pay the remaining amount of the purchase price of $53.1 million at the conclusion of the bareboat charter (or at any point prior, at our discretion). This vessel, STI Lombard, was delivered under the bareboat agreement in August 2015. This agreement is being accounted for as a finance lease as further described in Note 11. In July 2015, we purchased an MR product tanker from an unrelated third party, which was under construction at Hyundai Mipo Dockyard Co. Ltd. (“HMD”), for $37.0 million. This vessel, STI Black Hawk, was delivered in September 2015. In August 2015, we signed contracts with HMD to construct four MR product tankers for $35.8 million per vessel with deliveries scheduled in 2017. As part of this agreement, we received options to construct up to ten additional MR product tankers with fixed delivery dates and at fixed prices. In October 2015, we exercised four of the options received from HMD and signed agreements to construct four MR product tankers for $36.0 million each with deliveries scheduled in the third and fourth quarters of 2017. In December 2015, four options to construct MR product tankers with HMD expired unexercised. As a result, we wrote-off $0.7 million for deposits made on these vessels during the year ended December 31, 2015. F-25 During 2015, we were still party to the performance guarantees of the aforementioned seven VLCCs sold in March 2014 under the related construction contracts with the shipyards. In September 2015, one of the shipyards novated the construction contracts for five of these vessels, and in January 2016 the other shipyard novated the construction contracts for the remaining two vessels thus releasing the Company from all guarantees. As of December 31, 2015, we had a total of 12 newbuilding product tanker orders with HMD, DHSC and SSME which include eight MRs, and four LR2s for an aggregate purchase price of $491.5 million, of which $115.8 million in cash has been paid as of that date. Capitalized interest In accordance with IAS 23 “Borrowing Costs,” applicable interest costs are capitalized during the period that vessels are under construction. For the years ended December 31, 2015 and 2014, we capitalized interest expense for the vessels under construction of $5.6 million and $17.5 million, respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was 4.7% and 3.5% for the years ended December 31, 2015 and 2014, respectively. We cease capitalizing interest when the vessels reach the location and condition necessary to operate in the manner intended by management. A roll-forward of activity within Vessels under construction is as follows: In thousands of U.S. dollars Balance as of January 1, 2014 ............................................................................. Installment payments and other capitalized expenses ............................................ Sale of VLCCs (1) ................................................................................................... Capitalized interest ................................................................................................ Transferred to operating vessels and drydock ........................................................ Balance as of December 31, 2014 ........................................................................ $ $ 649,526 1,370,565 (90,293) 17,500 (1,542,421) 404,877 Installment payments and other capitalized expenses ............................................ Capitalized interest ................................................................................................ Transferred to operating vessels and drydock ........................................................ Write-off of vessel purchase options ..................................................................... Balance as of December 31, 2015 ........................................................................ 873,179 5,571 (1,150,678) (731) 132,218 $ (1) Represents installment payments and other capitalized costs on seven VLCC newbuilding contracts that were sold in March 2014. The following table is a timeline of future expected payments and dates for our vessels under construction as of December 31, 2015:* Q1 2016 - installment payments made ............................................. Q1 2016 - remaining installment payment ....................................... Q2 2016 ........................................................................................... Q3 2016 ........................................................................................... Q4 2016 ........................................................................................... Q1 2017 ........................................................................................... Q2 2017 ........................................................................................... Q3 2017 ........................................................................................... Q4 2017 ........................................................................................... In millions of U.S. dollars 56.9 $ 15.3 74.7 36.7 44.0 57.3 46.6 54.1 43.3 428.9 $ *These are estimates only and are subject to change as construction progresses. 6. Carrying values of vessels and vessels under construction At each balance sheet date, we review the carrying amounts of our vessels and related drydock costs to determine if there is any indication that those vessels and related drydock costs have suffered an impairment loss. If such indication exists, the recoverable amount of the vessels and related drydock costs is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. As part of this F-26 evaluation, we consider certain indicators of potential impairment, such as market conditions including forecast time charter rates and values for second hand product tankers, discounted projected vessel operating cash flows and the Company’s overall business plans. At December 31, 2015, we reviewed the carrying amount of our vessels to determine whether there was an indication that these assets had suffered an impairment. First, we compared the carrying amount of our vessels to their fair values less costs to sell (determined by taking into consideration two independent broker valuations). If the carrying amount of our vessels was greater than the fair values less costs to sell, we prepared a value in use calculation where we estimated the vessel’s future cash flows based on a combination of the latest forecast, published time charter rates for the next three years, a 3.0% growth rate in freight rates in each period thereafter and our best estimate of vessel operating expenses and drydock costs. These cash flows were then discounted to their present value using a pre-tax discount rate of 8.54%. The results of these tests were as follows: At December 31, 2015, we had 80 vessels in our fleet (including STI Lombard, which was bareboat chartered-in under a finance lease arrangement) and 12 vessels under construction: • 50 vessels had fair values less costs to sell in excess of their carrying amount. • 30 vessels had fair values less costs to sell less than their carrying amount. We prepared a value in use calculation for each these vessels which resulted in no impairment being recognized. • We did not obtain independent broker valuations for our 12 vessels under construction. To assess their carrying values for impairment, we prepared value in use calculations which resulted in no impairment being recognized. At December 31, 2014, we had 57 vessels in our fleet and 24 vessels under construction: • Three vessels were held for sale and written down to their fair value less estimated costs to sell • 36 vessels had fair values less costs to sell in excess of their carrying amount. • 18 vessels had fair values less costs to sell less than their carrying amount. We prepared a value in use calculation for each these vessels which resulted in no impairment being recognized. • We did not obtain independent broker valuations for the remaining 24 vessels under construction. To assess their carrying values for impairment, we prepared value in use calculations which resulted in no impairment being recognized. 7. Other non-current assets In thousands of U.S. dollars Scorpio LR2 Tanker Pool Ltd. pool working capital contributions (1) .......................................... Scorpio Handymax Tanker Pool Ltd. pool working capital contributions (2) ................................ Working capital contributions to Scorpio Group Pools ................................................................ Capitalized loan fees (3) ................................................................................................................. Security deposits for vessel claims (4) ........................................................................................... Non-current portion of acquired time charter contracts (5) ............................................................ At December 31, 2015 $ 13,600 5,656 19,256 2014 — 4,115 4,115 $ 2,527 1,554 — $ 23,337 19,548 — 65 $ 23,728 (1) For vessels in the Scorpio LR2 Pool, working capital contributions are repaid, without interest, upon a vessel’s exit from each pool. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. F-27 (2) For vessels in the Scorpio Handymax Tanker Pool, working capital contributions are repaid, without interest, upon a vessel’s exit from each pool no later than six months after the exit date. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. (3) Primarily represents upfront loan fees on our credit facilities being used to finance our newbuilding vessels. These are reclassified to debt when the tranche of the loan to which the vessel relates is drawn. (4) Represents security deposits paid in 2015 in order for two of our vessels to be promptly released from the arrest instigated by an unpaid bunkers supplier. These vessels were on time charter to an unrelated third party when the bunkers in question were purchased. We believe that the claim for these unpaid bunkers is the ultimate responsibility of this time charterer and we have initiated arbitrations against them to obtain a declaration to that effect. Therefore, we have not recorded a provision for this matter as of December 31, 2015. (5) Represents the non-current portion of the value of time charter contracts acquired in November 2013 as part of the acquisition of four MRs in exchange for common shares. 8. Investment in Dorian LPG Ltd. In November 2013, we contributed our VLGC business, which included 11 VLGC newbuilding contracts, options to purchase two additional VLGCs and a cash payment of $1.9 million (together our “initial investment”) to Dorian LPG Ltd. (“Dorian”) in exchange for newly issued shares representing 30% of Dorian’s outstanding shares immediately following the transaction. As of the closing date of the transaction, we paid $83.1 million in installment payments for the 11 VLGC contracts. Additionally, in November 2013, we purchased 24,121,621 new shares of Dorian’s common stock as part of a private placement of shares for total consideration of $75.0 million. 2014 Activity In February 2014, Dorian completed a follow-on offering of common shares which resulted in the dilution of our ownership percentage to 26.5% from 30.0%. In April 2014, Dorian effected a one for five reverse stock split of its common shares, reducing our total number of shares held in Dorian. Concurrently with this reverse stock split, Dorian issued 1,412,698 shares in a private placement to an investor that was unrelated to us. Accordingly, our ownership percentage in Dorian was reduced to 25.7% from 26.5% after giving effect to this private placement. In May 2014, Dorian completed its initial public offering of common shares in the United States and commenced trading on the NYSE under the symbol “LPG.” As a result, our ownership percentage in Dorian decreased to 22.1% from 25.7% after giving effect to this transaction. In June 2014, we acquired 7,500,000 of our common shares from an existing shareholder in exchange for 3,422,665 common shares of Dorian in a privately negotiated transaction. As a result, we recognized a gain of $10.9 million. Accordingly, our ownership percentage in Dorian decreased to 16.3% from 22.1% after giving effect to this transaction. On October 29, 2014, Robert Bugbee, our President, resigned from the board of directors of Dorian. Accordingly, we determined that we no longer had significant influence over Dorian’s financial and operating decisions, and we therefore ceased accounting of this investment under the equity method as of that date. As a result, we remeasured our investment in Dorian to its fair market value as of October 29, 2014, resulting in a write-down of $13.9 million. Subsequent to October 29, 2014, our investment in Dorian was accounted for as “available for sale” with changes in fair market value recorded within equity, through other comprehensive income or loss. In November 2014, we exercised our rights under the shareholders agreement with Dorian to cause Dorian to register for re-sale under the Securities Act of 1933, as amended, or the Securities Act, all of the shares of Dorian that we owned. 2015 activity In July 2015, we sold our investment in Dorian to two unrelated third parties for aggregate net proceeds of $142.4 million. As a result of these sales, we recognized a gain of $1.2 million during the year ended December 31, 2015. All shares were sold pursuant to an effective resale registration statement filed by Dorian on July 8, 2015. F-28 The following is a rollforward of the carrying value of our investment in Dorian during the years ended December 31, 2015, 2014 and 2013: In thousands of U.S. dollars Value of initial shares received at closing .................................................................................... Investment in private placement ................................................................................................... Our share of net income for the period ended December 31, 2013............................................... Carrying value at December 31, 2013 .......................................................................................... Disposal of shares ......................................................................................................................... Our share of net income through October 29, 2014 ...................................................................... Loss recognized upon change in accounting method .................................................................... Carrying value at October 29, 2014 .............................................................................................. Other comprehensive loss ............................................................................................................. Carrying value at December 31, 2014 .......................................................................................... Other comprehensive income ....................................................................................................... Carrying value at date of sales ...................................................................................................... Net proceeds from sales ................................................................................................................ Gain on disposal ........................................................................................................................... $ Rollforward of carrying value of investment in Dorian $ 134,435(1) 75,000(2) 368 209,803 (56,124)(3) 1,473 (13,895)(4) 141,257 (10,801)(5) 130,456 10,801 141,257 142,436 1,179 (1) At the time of our initial investment, Dorian was listed on the Norwegian Over the Counter Exchange (“NOTC”). The value of our initial investment was determined based on the closing price of Dorian on the NOTC at November 26, 2013 of NOK 20.5, using an NOK/USD exchange rate of 6.0923 NOK/USD at that date. (2) We purchased 24,121,621 new shares of Dorian’s common stock as part of a private placement of shares for total consideration of $75.0 million in November 2013. (3) In May 2014, we acquired 7,500,000 of our common shares from an existing shareholder in exchange for the sale to said shareholder of 3,422,665 common shares in Dorian in a privately negotiated transaction. As a result, we recognized a gain of $10.9 million. Accordingly, our ownership percentage in Dorian reduced to 16.3% from 25.7% after giving effect to this transaction. (4) Calculated based on the difference between the carrying value as of October 28, 2014 and the opening share price on October 29, 2014. (5) Amount recorded within equity, through other comprehensive income. Calculated based on the difference between the carrying value as of October 29, 2014 and closing share price on December 31, 2014. Our share of Dorian’s results prior to the discontinuation of equity method accounting in October 2014 Dorian’s results for 2014 included herein are derived from Dorian’s unaudited financial statements for the three months ended March 31, 2014 and the nine months ended December 31, 2014. Furthermore, Dorian prepares its financial statements in accordance with Generally Accepted Accounting Principles in the United States (“US GAAP”). As such, adjustments were made to convert our share of Dorian’s results from US GAAP to IFRS. In thousands of U.S. dollars Revenue .......................................... Operating income ............................ Net income ...................................... Our share of net income (3) .............. Adjustments Dorian LPG Ltd. for the calendar year ended December 31, 2014 (1) Impact of conversion to IFRS (2) Adjusted Dorian LPG Ltd. for the calendar year ended December 31, 2014 $ $ 78,575 20,712 15,459 1,604 $ $ — (614) (614) (131) $ 78,575 20,098 14,845 1,473 (1) Prepared in accordance with US GAAP using Dorian’s unaudited financial statements for the three months ended March 31, 2014 and the nine months ended December 31, 2014. (2) This represents the (i) excess depreciation calculated as a result of our stepped up basis recorded upon our initial investment and (ii) our conversion of depreciation expense from US GAAP to IFRS. F-29 (3) Our share of net income captures Dorian’s financial results from January 1, 2014 through October 29, 2014, the date we ceased equity method accounting. In thousands of US dollars Revenue ................................... Operating income ..................... Net income ............................... Our share of net income ........... Dorian LPG Ltd. for the three months ended December 31, 2013 (1) 13,800 $ 3,700 5,243 383 $ (1) Prepared in accordance with US GAAP. Adjustments Impact of revaluation and conversion to IFRS (3) Adjusted Dorian LPG Ltd. for the three months ended December 31, 2013 $ — (48) (48) (14) $ 13,800 3,652 5,195 369(2) $ (2) We estimated our share of Dorian’s net income for the 35 day period beginning with the closing date of our initial investment in Dorian, November 26, 2013 and ending on December 31, 2013 by pro-rating Dorian’s results for quarter ending December 31, 2013 and adjusting for material transactions occurring before or after the closing date. (3) This represents the (i) excess depreciation calculated as a result of our stepped up basis and (ii) our conversion of depreciation expense from US GAAP to IFRS. 9. Accounts payable The following table depicts the components of our accounts payable as of December 31, 2015 and 2014: In thousands of U.S. dollars Progress payments due for vessels under construction .................................................................... Suppliers .......................................................................................................................................... Accounts payable to SSM ................................................................................................................ Scorpio MR Pool Ltd ....................................................................................................................... Accounts payable to SCM ............................................................................................................... Scorpio Handymax Tanker Pool Ltd ............................................................................................... Scorpio LR2 Pool Ltd ...................................................................................................................... Scorpio Panamax Tanker Pool Ltd .................................................................................................. Accounts payable to SSH ................................................................................................................ At December 31, 2015 2014 $ 13,750 10,874 484 175 170 167 63 — — $ 25,683 $ — 10,004 241 1,790 759 737 706 661 31 $ 14,929 The majority of accounts payable are settled with a cash payment within 90 days. No interest is charged on accounts payable. We consider that the carrying amount of accounts payable approximates fair value. 10. Accrued expenses The following table depicts the components of our accrued expenses as of December 31, 2015 and 2014: In thousands of U.S. dollars Accrued short-term employee benefits ......................................................................................... Accrued interest ............................................................................................................................ Suppliers ....................................................................................................................................... Accrued expenses to Scorpio Handymax Tanker Pool Ltd........................................................... Accrued expenses to SSH ............................................................................................................. Accrued expenses to SCM ............................................................................................................ Accrued expenses to SSM ............................................................................................................ Deposit from Scorpio Bulkers (1) .................................................................................................. Accrued vessel purchase commissions - SSH (2) ........................................................................... Other accrued expenses ................................................................................................................ F-30 $ At December 31, 2015 2014 $ 13,738 11,154 5,696 205 77 5 — — — 1,768 $ 32,643 5,226 7,751 6,542 — 13 15 35 31,277 3,115 1,165 $ 55,139 (1) In 2014, we received a $31.3 million deposit pursuant to an agreement to purchase four LR2 tankers from Scorpio Bulkers Inc., a related party. We received this deposit as security for the scheduled installment payments that were expected to occur prior to the closing date of the transaction. The transaction closed, and the deposit was returned, in July 2015. (2) The balance at December 31, 2014 represents commissions payable to SSH relating to the deliveries of eight vessels under our Newbuilding Program. 11. Current and long-term debt The following is a breakdown of the current and non-current portion of our debt outstanding as of December 31, 2015 and December 31, 2014: In thousands of U.S. dollars Current portion (1)..................................................................................................................... Debt related to vessels held for sale (2) ..................................................................................... Finance lease ............................................................................................................................ Current portion of long-term debt ............................................................................................ $ As of December 31, 2015 2014 124,503 — 53,372 177,875 87,163 32,932 — 120,095 $ Non-current portion (3) .............................................................................................................. 1,872,114 $ 2,049,989 1,451,427 $ 1,571,522 (1) The current portion at December 31, 2015 was net of unamortized deferred financing fees of $3.8 million. The current portion at December 31, 2014 was net of unamortized deferred financing fees of $2.5 million. (2) This relates to amounts due for three vessels that were held for sale under our 2010 Revolving Credit Facility at December 31, 2014 and is shown net of unamortized deferred financing fees of $0.1 million. STI Harmony and STI Heritage were designated as held for sale at December 31, 2014. Venice was designated as held for sale as of December 31, 2013. These vessels were sold, and the debt was repaid, during the year ended December 31, 2015. (3) The non-current portion at December 31, 2015 was net of unamortized deferred financing fees of $52.0 million. The non-current portion at December 31, 2014 was net of unamortized deferred financing fees of $44.6 million. The following is a table summarizing our current debt, non-current debt and available debt as of December 31, 2015: As of December 31, 2015 In thousands of U.S. dollars 2011 Credit Facility .......................................................... Newbuilding Credit Facility ............................................. 2013 Credit Facility .......................................................... K-Sure Credit Facility ....................................................... KEXIM Credit Facility ..................................................... Credit Suisse Credit Facility ............................................. ABN AMRO Credit Facility ............................................. ING Credit Facility ........................................................... BNP Paribas Credit Facility .............................................. Scotiabank Credit Facility ................................................ Senior Notes Due 2020 ..................................................... Senior Notes Due 2017 ..................................................... Convertible Notes ............................................................. Finance lease ..................................................................... Less: deferred financing fees ............................................ Current $ 7,935 5,998 31,216 36,522 33,650 — 9,480 2,333 1,150 — — — — 53,372 181,656 (3,781) $ 177,875 $ Non-Current 93,041 65,845 397,037 403,478 366,600 — 130,350 32,375 16,100 — 53,750 51,750 313,793 — 1,924,119 (52,005) 1,872,114 $ Total outstanding 100,976 $ 71,843 428,253 440,000 400,250 — 139,830 34,708 17,250 — 53,750 51,750 313,793 53,372 2,105,775 (55,786) $ 2,049,989 Available — — — — — 61,200(1) — 52,000(2) 17,250(3) 36,000(4) — — — — 166,450 — 166,450 $ (1) Availability can be used to finance the lesser of $30.6 million and 60% of each vessel’s fair market value at the respective drawdown dates. F-31 (2) Availability can be used to finance the lesser of $26.0 million and 47.5% of the fair market value of the respective vessels. (3) Availability can be used to finance the lesser of $17.3 million and 48% of the fair market value of the respective vessels (4) In November 2015, the Company received a commitment for a loan facility of up to $36.0 million from Scotiabank Europe plc which is expected to be utilized to refinance the existing indebtedness on an LR2 product tanker (2015 built). The loan facility is subject to customary conditions precedent and the execution of definitive documentation. 2010 Revolving Credit Facility On June 2, 2010, we executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DNB Bank ASA, acting through its New York branch, and ABN AMRO Bank N.V, for a senior secured term loan facility of up to $150.0 million. On July 12, 2011, we amended and restated the credit facility to convert it from a term loan to a reducing revolving credit facility. This facility matured in June 2015 and all amounts due were settled. The activity during the years ended December 31, 2015 and 2014 is as follows: • • • • In January 2014, we drew down $72.4 million and in March 2014, we paid $22.5 million on this facility as a result of the sales of Noemi and Senatore. We also wrote-off a total of $0.2 million of deferred financing fees as part of these debt repayments. In March 2015, we paid $6.1 million into this facility as a result of the sale of Venice (in addition to a $1.8 million scheduled principal payment relating to STI Harmony, STI Heritage and STI Highlander). In April 2015, we paid $25.6 million into this facility as a result of the sales of STI Harmony and STI Heritage. We also wrote-off a total of $21,465 of deferred financing fees as part of these debt repayments. In June 2015, the 2010 Revolving Credit Facility matured and we made an $8.0 million principal payment to settle all amounts outstanding. The mortgage on STI Highlander (the only vessel collateralized under this facility at the time) was released. 2011 Credit Facility On May 3, 2011, we executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DNB Bank ASA, acting through its New York branch, and ABN AMRO Bank N.V., for a senior secured term loan facility of up to $150.0 million. This credit facility bears interest at LIBOR plus an applicable margin of (i) 3.25% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and (ii) 3.50% per annum when our debt to capitalization ratio is greater than 50%. The credit facility matures on May 3, 2017 and the availability under this credit facility expired on January 31, 2014. Borrowings for each vessel financed under this facility represent a separate tranche, with repayment terms dependent on the age of the vessel at acquisition. Each tranche under the credit facility is repayable in equal quarterly installments, with a lump sum payment at maturity, based on a full repayment of such tranche when the vessel to which it relates is 16 years of age. Our subsidiaries, which may at any time, own one or more of our vessels, act as guarantors under the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. F-32 The financial covenants include: • The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00. • Consolidated tangible net worth (i.e. shareholders’ equity) shall be no less than $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and 50% of the value of any new equity issues from July 1, 2010 going forward. • The ratio of EBITDA to interest expense shall be no less than 2.00 to 1.00. Such ratio shall be calculated quarterly on a trailing four quarter basis. In addition, we are restricted from paying dividends unless our EBITDA to interest expense ratio is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment. • Consolidated liquidity (defined as cash and cash equivalents) must not be less than $25 million, of which unrestricted cash and cash equivalents shall be not less than $15.0 million, until we own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional vessel. • The aggregate fair market value of the collateral vessels shall at all times be no less than 150% of the then aggregate outstanding principal amount of loans under the credit facility. In January 2014, we drew down $52.0 million from the 2011 Credit Facility. In connection with this drawdown, STI Duchessa, STI Le Rocher and STI Larvotto were provided as collateral under the facility. The outstanding balances at December 31, 2015 and December 31, 2014 were $101.0 million and $108.9 million, respectively, and the availability under this credit facility expired on January 31, 2014. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Newbuilding Credit Facility On December 21, 2011, we executed a credit facility agreement with Credit Agricole Corporate and Investment Bank and Skandinaviska Enskilda Banken AB for a senior secured term loan facility of up to $92.0 million. During the year ended December 31, 2012, we drew down an aggregate of $92.0 million from this facility to partially finance the deliveries of STI Amber, STI Topaz, STI Ruby and STI Garnet ($23.0 million per vessel). These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. Borrowings under the credit facility bear interest at LIBOR plus an applicable margin of 2.70% per annum. The facility was fully drawn as of December 31, 2012. All terms mentioned in this section are defined in the agreement. The facility is separated into four tranches (one per each vessel) and repayment of the tranche relating to the respective vessel commenced after delivery of that vessel in quarterly installments of $375,000, which equates to a repayment profile of 15.33 years. Each tranche is scheduled to mature approximately seven years after delivery of the relevant vessel from the shipyard. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. The financial covenants include: • The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00. • Consolidated tangible net worth (i.e. shareholders’ equity) shall be no less than $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and 50% of the value of any new equity issues from July 2, 2010 going forward. • The ratio of EBITDA to interest expense shall be no less than 2.50 to 1.00. Such ratio shall be calculated quarterly on a trailing four quarter basis. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment. F-33 • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the collateral vessels shall at all times be no less than 140% (120% if the vessel is subject to acceptable long-term employment) of the aggregate principal amount outstanding plus a pro rata amount of any allocable swap exposure for the credit facility. In March 2014, we converted the Newbuilding Credit Facility from a term loan to a reducing revolving credit facility. This gives us the ability to draw-down and repay the available commitments under the facility when needed. All other terms and definitions remain unchanged. The amount available is reduced by $1.5 million each quarter until the maturity date in June 2019. This transaction was accounted for as a debt modification and accordingly, no deferred financing fees were written off. The amounts outstanding under this facility as of December 31, 2015 and 2014 were $71.8 million and $77.8 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. 2013 Credit Facility On July 2, 2013, we entered into a senior secured revolving credit facility and term loan facility with Nordea Bank Finland plc and the other lenders named therein of up to $525.0 million to finance the acquisition of certain vessels for which we previously entered into newbuilding contracts. This credit facility is secured by, among other things, a first-priority cross- collateralized mortgage on the vessels collateralized under the facility (the “Collateral Vessels”). Our subsidiaries that own the Collateral Vessels act as joint and several guarantors under our 2013 Credit Facility. We refer to this credit facility as our 2013 Credit Facility. Drawdowns of the term loan occurred in connection with the delivery of a Collateral Vessel in an amount equal to the lesser of 60% of (i) the contract price for such vessel or (ii) such vessel’s fair market value. Drawdowns of the revolving credit facility occurred in connection with the delivery of a Collateral Vessel and are also capped at the lesser of 60% of (i) the contract price for such vessel or (ii) such vessel’s fair market value, with such amount, once drawn, available on a revolving basis. Drawdowns under the term loan and revolving loan bear interest at LIBOR plus an applicable margin of 3.50%. Each facility was fully drawn in 2015. The term loan is repayable and the revolving loans reduced, in each case, in an amount equal to 1/60th of such loan on a consecutive quarterly basis until final maturity on the sixth anniversary of the facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our 2013 Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than (i) $150.0 million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter beginning on July 1, 2010 and (ii) 50% of the value of any new equity issues from July 1, 2010 going forward. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the Collateral Vessels shall at all times be no less than 140% of the then aggregate outstanding principal amount of loans under the credit facility. In November 2014, we signed a First Amendatory Agreement to the 2013 Credit Facility to replace four Handymax product tankers with two LR2 product tankers that were under construction. As a result of this agreement, the availability under the revolving credit facility was reduced by $2.1 million to $262.9 million. F-34 In May 2015, we signed a Second Amendatory Agreement to the 2013 Credit Facility to replace two Handymax product tankers with an LR2 product tanker that was under construction. As a result of this agreement, the availability under the revolving credit facility was reduced by $1.8 million to $261.1 million. We made the following drawdowns from our 2013 Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $ 35.4 19.5 19.3 35.1 18.5 Drawdown date January 2015 March 2015 April 2015 June 2015 June 2015 Collateral STI Alexis STI Pontiac STI Osceola STI Spiga STI Seneca (1) (2) (1) In October 2015, we refinanced the amount borrowed relating to STI Pontiac by repaying $18.9 million on our 2013 Credit Facility and drawing down $17.5 million under our ING Credit Facility (as described below). (2) In July 2015, we refinanced the amount borrowed relating to STI Spiga by repaying $35.1 million on our 2013 Credit Facility and drawing down $35.1 million under our ABN AMRO Credit Facility (as described below). The amounts outstanding relating to this facility as of December 31, 2015 and 2014 were $428.3 million and $384.5 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. K-Sure Credit Facility In February 2014, we entered into a $458.3 million senior secured term loan facility which consists of a $358.3 million tranche with a group of financial institutions that is being 95% covered by Korea Trade Insurance Corporation (the “K-Sure Tranche”) and a $100.0 million commercial tranche with a group of financial institutions led by DNB Bank ASA (the “Commercial Tranche”). We refer to this credit facility as our K-Sure Credit Facility. Drawdowns under the K-Sure Credit Facility occurred in connection with the delivery of certain of our newbuilding vessels as specified in the agreement. The amount of each drawdown did not exceed the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel. Drawdowns were available until the earlier of (i) the delivery date of the last vessel specified in the agreement to be acquired, (ii) September 30, 2015 and (iii) the date on which the total commitments under the loan are fully borrowed, cancelled or terminated. Repayments will be made in equal consecutive six month repayment installments in accordance with a 15 year repayment profile under the Commercial Tranche and a 12 year repayment profile under the K-Sure Tranche. Repayments commenced in July 2015 for the K-Sure Tranche and September 2015 for the Commercial Tranche. The Commercial Tranche matures on the sixth anniversary of the delivery date of the last vessel to be acquired and the K-Sure Tranche matures in January 2027 assuming the Commercial Tranche is refinanced through that date. Borrowings under the K-Sure tranche bear interest at LIBOR plus an applicable margin of 2.25%. Borrowings under the Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date in respect of the Commercial Tranche. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. F-35 Our K-Sure Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of any new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of loans under the credit facility. We made the following drawdowns from our K-Sure Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) Drawdown date $ 19.9 19.5 19.5 30.3 30.3 19.5 30.3 30.3 21.0 21.0 19.5 January 2015 February 2015 March 2015 March 2015 April 2015 April 2015 April 2015 April 2015 May 2015 June 2015 July 2015 Collateral STI Gramercy STI Bronx STI Manhattan STI Winnie STI Oxford STI Queens STI Lauren STI Connaught STI Notting Hill STI Westminster STI Brooklyn The amounts outstanding relating to this facility as of December 31, 2015 and 2014 were $440.0 million and $197.2 million, respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. KEXIM Credit Facility In February 2014, we executed a senior secured term loan facility for $429.6 million, or the KEXIM Credit Facility, with a group of financial institutions led by DNB Bank ASA and Skandinaviska Enskilda Banken AB (publ) and from the Export-Import Bank of Korea, or KEXIM, a statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea. This KEXIM Credit Facility includes commitments from KEXIM of up to $300.6 million, or the “KEXIM Tranche” and a group of financial institutions led by DNB Bank ASA and Skandinaviska Enskilda Banken AB (publ) of up to $129.0 million or the “Commercial Tranche”. Drawdowns under the KEXIM Credit Facility occurred in connection with the delivery of 18 vessels under our Newbuilding Program as specified in the loan agreement. The amount of each drawdown did not exceed the lesser of 60% of the newbuilding contract price and 74% of the fair market value of the relevant vessel. Drawdowns were available until the earlier of (i) the delivery date of the last vessel specified in the agreement to be acquired, (ii) March 31, 2015 and (iii) the date on which the total commitments under the loan are fully borrowed, cancelled or terminated. In addition to KEXIM’s commitment of up to $300.6 million, KEXIM also provided an optional guarantee for a five year amortizing note of $125.25 million, the proceeds of which reduce the $300.6 million KEXIM Tranche. These notes were issued on July 18, 2014 when Seven and Seven Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands or the “Issuer”, completed an offering of $125,250,000 in aggregate principal amount of floating rate guaranteed notes due 2019 or the “KEXIM Notes” in a private offering to qualified institutional buyers pursuant to the Securities Act and in offshore transactions complying with Regulation S under the Securities Act. The KEXIM Notes were issued in connection with the KEXIM Tranche and reduced KEXIM’s funding obligations and our borrowing costs under KEXIM Tranche by 1.55% per year. Seven and Seven Ltd. is an unaffiliated company that was incorporated for the purpose of facilitating this transaction and servicing the bonds until maturity. F-36 Payment of 100% of all regularly scheduled installments of principal of, and interest on, the KEXIM Notes are guaranteed by KEXIM. The vessels in the loan are the collateral for the KEXIM Credit Facility, which includes the KEXIM Notes. The KEXIM Notes are currently listed to the Singapore Exchange Securities Trading Limited or the “SGX-ST”. The KEXIM Notes are not listed on any other securities exchange, listing authority or quotation system. The Commercial Tranche matures on the sixth anniversary of the delivery date of the last vessel specified under the loan (September 2020) and the KEXIM Tranche matures on the twelfth anniversary of the weighted average delivery date of the vessels specified under the loan assuming the Commercial Tranche is refinanced through that date (September 2026). Repayments will be made in equal consecutive semi-annual repayment installments in accordance with a 15 year repayment profile under the Commercial Tranche and a 12 year repayment profile under the KEXIM Tranche (which includes the KEXIM Notes). Repayments under the KEXIM Tranche will first be applied to the KEXIM Notes until the maturity of those notes in September 2019 and all subsequent repayments will applied to the remaining amounts outstanding under KEXIM Tranche until the maturity of that tranche in September 2026 (assuming the Commercial Tranche is refinanced through that date). Repayments commenced in March 2015 for the KEXIM Tranche and in July 2015 for the Commercial Tranche. Borrowings under the KEXIM Tranche bear interest at LIBOR plus an applicable margin of 3.25%. Borrowings under the Commercial Tranche bear interest at LIBOR plus an applicable margin of 3.25% from the effective date of the agreement to the fifth anniversary thereof and 3.75% thereafter until the maturity date in respect of the Commercial Tranche. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our KEXIM Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of any new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or 5% of total indebtedness. • The aggregate fair market value of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of loans under the credit facility. We made the following drawdown from our KEXIM Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $ 30.3 Drawdown date January 2015 Collateral STI Veneto The amounts outstanding relating to this facility (which includes the KEXIM Notes) as of December 31, 2015 and 2014 were $400.3 million and $399.3 million respectively, and the facility was fully drawn as of December 31, 2015. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. F-37 ABN AMRO Credit Facility In July 2015, we executed a senior secured term loan facility with ABN AMRO Bank N.V. and DVB Bank SE for up to $142.2 million. This facility was fully drawn in 2015 to partially finance the purchases of STI Savile Row, STI Kingsway and STI Carnaby and to refinance the existing indebtedness on STI Spiga. We refer to this credit facility as our ABN AMRO Credit Facility. Repayments under the ABN AMRO Credit Facility will be made in equal consecutive quarterly repayment installments in accordance with a 15 year repayment profile. Repayments commenced three months after the drawdown date of each vessel. Each tranche matures on the fifth anniversary of the initial drawdown date and a balloon installment payment is due on the maturity date of each tranche. Borrowings under the ABN AMRO Credit Facility bear interest at LIBOR plus an applicable margin of 2.15%. A commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our ABN AMRO Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 140% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns from our ABN AMRO Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $ 35.7 35.1 35.7 35.7 Drawdown date July 2015 August 2015 August 2015 September 2015 Collateral STI Savile Row STI Spiga STI Kingsway STI Carnaby (1) (1) In July 2015, we refinanced the amount borrowed relating to STI Spiga by repaying $35.1 million on our 2013 Credit Facility and drawing down $35.1 million from our ABN AMRO Credit Facility. The outstanding balance at December 31, 2015 was $139.8 million and the facility was fully drawn as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. ING Credit Facility In June 2015, we executed a senior secured term loan facility with ING Bank N.V., London Branch for a credit facility of up to $52.0 million. In September 2015, we amended and restated the facility to increase the borrowing capacity to $87.0 million and in March 2016, we amended and restated the facility to increase the borrowing capacity to $132.5 million. The facility was used to partially finance the delivery of STI Black Hawk ($17.5 million in September 2015), refinance the existing indebtedness of STI Pontiac ($17.5 million in October 2015), partially finance the delivery of STI Grace ($26.0 F-38 million in March 2016) and will be used to partially finance the delivery of an LR2 that is currently under construction with delivery expected in the second quarter of 2016, to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015-built). We refer to this facility as our ING Credit Facility. Drawdowns shall not exceed $26.0 million or 47.5% of the fair market value of each vessel for the two LR2s currently under construction, $28.0 million or 47.5% of the fair market value for STI Lombard and $17.5 million or 47.5% of the fair market value for the 2015-built MR product tanker. Repayments on all borrowings will be made in equal consecutive quarterly installments, in accordance with a 15 year repayment profile with the first installment falling due three calendar months after the drawdown date and a balloon installment payment which is due on the maturity date of June 24, 2022. Borrowings under the ING Credit Facility bear interest at LIBOR plus a margin of 1.95% per annum. A commitment fee equal to 40% of the applicable margin is payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our ING Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization not more than 0.60 to 1:00. • Consolidated tangible net worth of not less than $677.3 million plus (a) 25% of the positive consolidated net income for each fiscal quarter commencing on or after October 1, 2013 and (b) 50% of the value of the equity proceeds realized from any issuance of equity interests occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns from our ING Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $ 17.5 17.5 Drawdown date September 2015 October 2015 Collateral STI Black Hawk STI Pontiac (1) (1) In October 2015, we refinanced the amount borrowed relating to STI Pontiac by repaying $18.9 million on our 2013 Credit Facility and drawing down $17.5 million under our ING Credit Facility. The outstanding balance was $34.7 million as of December 31, 2015 and there was $52.0 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. BNP Paribas Credit Facility In December 2015, we executed a senior secured term loan facility with BNP Paribas SA for up to $34.5 million. In December 2015, we drew down $17.25 million and placed STI Memphis as collateral under this facility. The remaining proceeds of $17.25 million were used to refinance the existing indebtedness on STI Battery in February 2016. These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. We refer to this facility as our BNP Paribas Credit Facility. F-39 Repayments on all borrowings will be made in equal consecutive quarterly installments, in accordance with a 15 year repayment profile with the first installment falling due on February 29, 2016 and subsequent installments falling due at consecutive intervals of three calendar months thereafter. A final balloon payment is due on the maturity date of December 18, 2020. The facility bears interest at LIBOR plus a margin of 1.95% per annum and a commitment fee equal to 40% of the applicable margin was payable on the unused daily portion of the credit facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our BNP Paribas Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 140% of the then aggregate outstanding principal amount of the loans under the credit facility. We made the following drawdowns from our BNP Paribas Credit Facility during the year ended December 31, 2015: Drawdown amount (in millions of U.S. dollars) $ 17.3 Drawdown date December 2015 Collateral STI Memphis The outstanding balance was $17.25 million as of December 31, 2015, and there was $17.25 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Credit Suisse Credit Facility In October 2015, we executed a senior secured term loan facility with Credit Suisse AG, Switzerland for up to $61.2 million. The proceeds of this facility will be used to finance a portion of the purchase price of two LR2 product tankers currently under construction at SSME with expected deliveries in the third and fourth quarters of 2016. These vessels are owned individually by certain of our subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor. We refer to this facility as our Credit Suisse Credit Facility. Drawdowns shall not exceed the lesser of $30.6 million or 60% of the fair market value of each vessel. Repayments will be made in accordance with a 15 year repayment profile and will commence three calendar months after the drawdown date in respect of each tranche with subsequent installments falling due at consecutive intervals of three calendar months thereafter. A balloon payment is due on the maturity date of five years from the date of delivery of each vessel. The facility will bear interest at LIBOR plus a margin ranging between 1.95% and 2.40% per annum (depending on the advance ratio). A commitment fee equal to 1% of the amounts available is payable on the unused daily portion of this facility. The credit facility contains financial and restrictive covenants, which require us to, among other things, comply with certain financial tests (described below); deliver quarterly and annual financial statements and annual projections; maintain adequate insurances; comply with laws (including environmental laws and ERISA); maintain flag and class of our vessels. Other such covenants may, among other things, restrict consolidations, mergers or sales of our assets; require us to obtain F-40 lender approval on changes in our vessel manager; limit our ability to place liens on our assets; limit our ability to incur additional indebtedness; prohibit us from paying dividends if there is a covenant breach under the loan or an event of default has occurred or would occur as a result of payment of such dividend; prohibit our transactions with affiliates. Our Credit Suisse Credit Facility includes financial covenants that require us to maintain: • The ratio of net debt to total capitalization no greater than 0.60 to 1.00. • Consolidated tangible net worth no less than $677.3 million plus (i) 25% of the cumulative positive net income (on a consolidated basis) for each fiscal quarter commencing on or after October 1, 2013 and (ii) 50% of the value of new equity issues occurring on or after October 1, 2013. • The ratio of EBITDA to net interest expense greater than 2.50 to 1.00 calculated on a trailing four quarter basis. • Minimum liquidity of not less than the greater of $25.0 million or $500,000 per each owned vessel. • The aggregate of the FMV of the vessels provided as collateral under the facility shall at all times be no less than 135% of the then aggregate outstanding principal amount of the loans under the credit facility. There were no amounts borrowed as of December 31, 2015, and there was $61.2 million available to draw as of that date. We were in compliance with the financial covenants relating to this facility as of December 31, 2015. Scotiabank Credit Facility In November 2015, we received a commitment from Scotiabank Europe plc for a loan facility of up to $36.0 million. The loan facility is expected to be used to refinance the existing indebtedness on one LR2 product tanker (2015 built), has a final maturity of three years from the drawdown date and bears interest at LIBOR plus a margin of 1.50% per annum. The loan facility is subject to customary conditions precedent and the execution of definitive documentation. Nomura Term Margin Loan Facility In March 2015, we entered into a term margin loan facility with Nomura Securities International, Inc. for up to $30.0 million. The 9,392,083 shares that we owned in Dorian were pledged as collateral under this facility, and we were subject to certain covenants, including a loan to value ratio based on the amount outstanding and the market value of the shares that serve as collateral. Interest on the facility was LIBOR plus 4.50% per annum. This facility was drawn in March 2015 and repaid as part of the sale of our investment in Dorian in July 2015. Unsecured Senior Notes Due 2020 On May 12, 2014, we issued $50.0 million in aggregate principal amount of 6.75% Senior Notes due May 2020, or our Senior Notes Due 2020, and on June 9, 2014, we issued an additional $3.75 million aggregate principal amount of Senior Notes Due 2020 when the underwriters partially exercised their option to purchase additional Senior Notes Due 2020 on the same terms and conditions. The net proceeds from the issuance of the Senior Notes Due 2020 were $51.8 million after deducting the underwriters’ discounts, commissions and offering expenses. The Senior Notes Due 2020 bear interest at a coupon rate of 6.75% per year, payable quarterly in arrears on the 15th day of February, May, August and November of each year. Coupon payments commenced on August 15, 2014. The Senior Notes Due 2020 are redeemable at our option, in whole or in part, at any time on or after May 15, 2017 at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Senior Notes Due 2020 are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured and unsubordinated debt and are effectively subordinated to our existing and future secured debt, to the extent of the value of the assets securing such debt, and will be structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. No sinking fund is provided for the Senior Notes Due 2020. The Senior Notes Due 2020 were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and are listed on the NYSE under the symbol “SBNA.” The Senior Notes Due 2020 require us to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would occur as a result of such payment. If we undergo a change of F-41 control, holders may require us to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date. The financial covenants under our Senior Notes Due 2020 include: • Net borrowings shall not equal or exceed 70% of total assets. • Net worth shall always exceed $650.0 million. The outstanding balance was $53.75 million as of December 31, 2015 and December 31, 2014, and we were in compliance with the financial covenants relating to the Senior Notes Due 2020 as of that date. Convertible Senior Notes Due 2019 In June 2014, we issued $360.0 million in aggregate principal amount of convertible senior notes due 2019, or the Convertible Notes, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. This amount includes the full exercise of the initial purchasers’ option to purchase an additional $60.0 million in aggregate principal amount of the Convertible Notes in connection with the offering. The net proceeds we received from the issuance of the Convertible Notes after the exercise of the initial purchasers’ option to purchase additional Convertible Notes were $349.0 million after deducting the initial purchasers’ discounts, commissions and offering expenses of $11.0 million. As part of the transaction, we used a portion of the net proceeds to repurchase $95.0 million of our common stock, or 10,127,600 shares, at $9.38 per share in a privately negotiated transaction. The Convertible Notes bear interest at a coupon rate of 2.375% per annum, and are payable semi-annually in arrears on January 1 and July 1 of each year beginning on January 1, 2015. The Convertible Notes will mature on July 1, 2019, unless earlier converted, redeemed or repurchased. At issuance, the Convertible Notes were convertible in certain circumstances and during certain periods at an initial conversion rate of 82.0075 shares of common stock per $1,000 (which represents an initial conversion price of approximately $12.19 per share of common stock), subject to adjustment in certain circumstances as set forth in the indenture governing the Convertible Notes. Adjustments were made during years ended December 31, 2015 and 2014 to the initial conversion rate as a result of the issuance of dividends to our common stockholders. The table below details the dividends declared from the issuance of the Convertible Notes through March 17, 2016 and their corresponding effect to the conversion rate of the Convertible Notes. The conversion rate as of December 31, 2015 was 88.6790. Record Date August 22, 2014 ........... November 25, 2014 ..... March 13, 2015 ............ May 21, 2015 ............... August 14, 2015 ........... November 24, 2015 ..... March 10, 2016 ............ Dividends per share 0.100 0.120 0.120 0.125 0.125 0.125 0.125 $ $ $ $ $ $ $ Share Adjusted Conversion Rate (1) 82.8556 84.0184 85.2216 86.3738 87.4349 88.6790 90.5311 (1) Per $1,000 principal amount. Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding January 1, 2019 only under the following circumstances: • during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 15 trading days (whether or not consecutive) during a period of 25 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined below) per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; F-42 • if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or • upon the occurrence of specified corporate events as defined in the indenture (e.g. consolidations, mergers, a binding share exchange or the transfer or lease of all or substantially all of our assets). We may not redeem the Convertible Notes prior to July 6, 2017. We may redeem for cash all or any portion of the notes, at our option, on or after July 6, 2017 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 15 trading days (whether or not consecutive) during any 25 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes. The Convertible Notes require us to comply with certain covenants such as restrictions on consolidations, mergers or sales of assets. Additionally, if we undergo a fundamental change, holders may require us to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. We determined the initial carrying value of the liability component of the Convertible Notes to be $298.7 million based on the fair value of a similar liability that does not have any associated conversion feature. We used our Senior Notes Due 2020 issued in May 2014 as the basis for this determination. The difference between the fair value of the liability component and the face value of the Convertible Notes will be amortized over the term of the Convertible Notes under the effective interest method and recorded as part of financial expenses. The residual value of $61.3 million (the conversion feature) was recorded to additional paid-in capital. In July 2015, we repurchased $1.5 million face value of our Convertible Notes at an average price of $1,088.10 per $1,000 principal amount. As a result of this transaction, we reduced the liability and equity components of the Convertible Notes by $1.3 million and $0.4 million, respectively and recorded a gain of $46,273. We also wrote off $30,880 of deferred financing fees as a result of this transaction. The carrying values of the liability component of the Convertible Notes as of December 31, 2015 and 2014, were $313.8 million and $304.0 million, respectively. We incurred $8.5 million of coupon interest and $11.1 million of non-cash accretion of our Convertible Notes during the year ended December 31, 2015. We incurred $4.3 million of coupon interest and $5.3 million of non-cash accretion of our Convertible Notes during the year ended December 31, 2014. We were in compliance with the covenants related to the Convertible Notes as of December 31, 2015. Unsecured Senior Notes Due 2017 On October 31, 2014, we issued $45.0 million aggregate principal amount of 7.50% Unsecured Senior Notes due October 15, 2017 (the “Senior Notes Due 2017”) and on November 17, 2014, we issued an additional $6.75 million aggregate principal amount of Senior Notes Due 2017 when the underwriters exercised their option to purchase additional Senior Notes Due 2017 on the same terms and conditions. The net proceeds from the issuance of the Senior Notes Due 2017 were approximately $49.9 million after deducting the underwriters’ discounts, commissions and offering expenses. All terms mentioned are defined in the indenture. The Senior Notes Due 2017 bear interest at a coupon rate of 7.50% per year, payable quarterly in arrears on the 15th day of January, April, July and October of each year, commencing on January 15, 2015. The Senior Notes Due 2017 are redeemable at our option, in whole but not in part, at any time at our option, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Senior Notes Due 2017 are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured and unsubordinated debt. The Senior Notes Due 2017 are effectively subordinated to our existing and future secured debt, to the extent of the value of the assets securing such debt, and structurally subordinated to all existing and future debt and other liabilities of our subsidiaries. The Senior Notes Due 2017 were issued in minimum denominations of $25.00 and integral multiples of $25.00 in excess thereof and are listed on the NYSE under the symbol “SBNB.” F-43 The Senior Notes Due 2017 require us to comply with certain covenants, including financial covenants; restrictions on consolidations, mergers or sales of assets and prohibitions on paying dividends or returning capital to equity holders if a covenant breach or an event of default has occurred or would occur as a result of such payment. If we undergo a change of control, holders may require us to repurchase for cash all or any portion of their notes at a change of control repurchase price equal to 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the change of control purchase date. The financial covenants include: • Net borrowings shall not equal or exceed 70% of total assets. • Net worth shall always exceed $650.0 million. The outstanding balance was $51.75 million as of December 31, 2015 and December 31, 2014 and we were in compliance with the financial covenants as of those dates. Finance Lease Accounting In July 2015, we entered into an agreement with an unrelated third-party to purchase STI Lombard, an LR2 product tanker, which was, at the time, under construction at DSME for approximately $59.0 million. As part of this agreement, we agreed to make a deposit of $5.9 million and to bareboat charter-in the vessel for up to nine months, at $10,000 per day. STI Lombard was delivered to us under the bareboat charter-in agreement in August 2015. We are obligated to take ownership of the vessel and pay the remaining amount of the purchase price of $53.1 million at the conclusion of the bareboat charter in April 2016. This agreement is being accounted for as a finance lease. As of December 31, 2015, the finance lease liability balance was $53.4 million. The future minimum lease payments required under the lease at December 31, 2015 are as follows: In thousands of U.S. dollars Total minimum lease payments - 2016 .... Less amount representing interest ............ Future net minimum lease payments ....... As of December 31, 2015 54,335 (963) 53,372 $ The asset recorded under the finance lease is included in Vessels and drydock and consists of the following at December 31, 2015: In thousands of U.S. dollars Vessel and Drydock ................................... Accumulated depreciation .......................... As of December 31, 2014 2015 $ $ 60,974 (910) 60,064 $ — — — 12. Derivative financial instruments Interest rate swaps In August 2011, we entered into six interest rate swap agreements to manage interest costs and the risk associated with changing interest rates on our 2011 Credit Facility and 2010 Revolving Credit Facility with three different banks. Pursuant to these interest rate swap contracts, we agreed to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. In March 2014, as a result of the sales of Noemi and Senatore and corresponding debt repayment, we reduced the notional amount on three interest rate swaps relating to the 2010 Revolving Credit Facility to $30.0 million from $51.0 million. As a result of the reduction, we made a repayment of $0.3 million to settle the liability outstanding as of the date of settlement, and we recognized a realized gain on derivative financial instruments of $0.02 million. The interest rate swaps relating to the 2011 Credit Facility qualified for hedge accounting during the years ended December 31, 2015, 2014 and 2013. Accordingly, changes in their fair value, which the hedge is deemed to be effective, were recognized directly in other comprehensive income or loss. Changes in their fair value for any portion deemed to be ineffective were recognized in the consolidated statements of income or loss. The interest rate swaps relating to the 2010 Revolving Credit Facility were accounted for at fair value with any resultant gains or losses recognized in the consolidated statements of income during the years ended December 31, 2015, 2014 and 2013. F-44 In March 2015, we terminated the three interest rate swaps under our 2010 Revolving Credit Facility. As a result, we made a repayment of $0.1 million to settle the liability and recognized a realized gain of $0.1 million during the year ended December 31, 2015. Additionally, the three interest rate swaps under our 2011 Credit Facility expired in June 2015. Profit or loss sharing agreements In July 2012, we entered into a profit or loss sharing arrangement on the earnings of an LR1 product tanker that was not owned or operated by us. The agreement stipulated that 50% of the profits and losses were shared with the counterparty. The counterparty to this agreement was time chartering-in this vessel for a period of six months at $12,750 per day and this agreement expired in January 2013. In September 2012, we took delivery of an LR1 product tanker, FPMC P Eagle, on a time charter-in arrangement for one year at $12,800 per day. We also entered into a profit and loss sharing arrangement whereby 50% of the profits and losses relating to this vessel above or below the charterhire rate were shared with a third party who neither owns nor operates FPMC P Eagle. The profit or loss agreement expired on October 2013. In February 2015, we took delivery of an LR2 product tanker, Densa Crocodile, on a time charter-in arrangement for one year at $21,050 per day with an option to extend the charter for an additional year at $22,600 per day. We also entered into a profit and loss sharing agreement whereby 50% of the profits and losses relating to this vessel above or below the charterhire rate will be shared with a third party who neither owns nor operates this vessel. These agreements were treated as derivatives, recorded at fair value with any resultant gain or loss recognized in the statements of income or loss. Changes in fair value were recorded as unrealized gains and losses on derivative financial instruments and actual earnings were recorded as realized gains or losses on derivative financial instruments, within the consolidated statement of income or loss. The fair value of these instruments was determined by comparing published time charter rates to the charterhire rate and discounting those cash flows to their estimated present value. The following table summarizes the fair value of our derivative financial instruments as of December 31, 2015 and 2014, which are included in the consolidated balance sheets: In thousands of U.S. dollars Liabilities ............................................................................................................................................ Derivative financial instrument (interest rate swap - current) ............................................................. Derivative financial instrument (profit and loss agreement - current) ................................................ Derivative financial instrument (profit and loss agreement - non-current) ......................................... As of December 31, 2014 2015 $ — (1,175) (80) $ (205) — — $ (1,255) $ (205) The following has been recorded as realized and unrealized gains or losses on our derivative financial instruments during the years ended December 31, 2015, 2014 and 2013: Fair value adjustments Statement of income Amounts in thousands of U.S. dollars Profit and loss agreement ................................................................................. Interest rate swaps ............................................................................................ Total year ended December 31, 2015 ........................................................... Interest rate swaps ............................................................................................ Total year ended December 31, 2014 ........................................................... Profit and loss agreements ............................................................................... Interest rate swaps ............................................................................................ Total year ended December 31, 2013 ........................................................... Realized gain $ $ $ $ $ — 55 55 17 17 3 — 3 F-45 $ $ $ $ Unrealized gain/(loss) $ (1,255) $ — (1,255) $ Recognized in equity — 77 77 264 264 185 382 567 $ $ $ 135 135 — 117 117 13. Segment reporting Information about our reportable segments for the years ended December 31, 2015, 2014 and 2013 is as a follows: For the year ended December 31, 2015 In thousands of U.S. dollars Vessel revenue .......................................... $ Vessel operating costs .............................. Voyage expenses ...................................... Charterhire ................................................ Depreciation ............................................. General and administrative expenses ....... Write down of vessels held for sale and Panamax/ LR1 Handymax Aframax/LR2 MR 142,429 $ (35,254) (536) (26,755) (18,372) (1,390) 208,250 $ 368,203 $ (36,682) (194) (27,816) (29,125) (1,456) 36,679 $ (2,144) (1,186) (21,616) — (96) (100,476) (2,516) (20,678) (59,859) (4,329) gain / (loss) from sales of vessels ........ Write-off of vessel purchase options ....... Gain on sale of Dorian shares .................. Financial expenses .................................... Realized gain on derivative financial instruments ........................................... Unrealized loss on derivative financial 2,019 — — — — (2,054) — — — — instruments ........................................... Financial income ...................................... Other expenses, net (1)............................... Segment income or loss .......................... $ — — 1,397 15,053 $ — 7 — 58,075 $ — — — — — (1,255) 12 — — (731) — — — — 27 (20) 111,734 $ 179,621 $ Reportable segments subtotal Corporate and eliminations Total 755,561 $ (174,556) (4,432) (96,865) (107,356) (7,271) 150 $ 755,711 (174,556) (4,432) (96,865) (107,356) (65,831) — — — — (58,560) (35) (731) — — — — 1,179 (89,596) (35) (731) 1,179 (89,596) — 55 55 (1,255) 46 1,377 364,483 $ — 99 (61) (1,255) 145 1,316 (146,734) $ 217,749 (1) In September 2015, we received a payment of $1.4 million as a result of a termination fee received when the owner of one of our time chartered-in vessels canceled the contract prior to its expiration date. For the year ended December 31, 2014 In thousands of U.S. dollars Vessel revenue ......................................... Vessel operating costs ............................. Voyage expenses ..................................... Charterhire ............................................... Depreciation ............................................ General and administrative expenses ...... Write down of vessels held for sale ........ Gain on sale of VLCCs ........................... Gain on sale of Dorian shares ................. Re-measurement of investment in Dorian .................................................. Financial expenses ................................... Realized gain on derivative financial instruments .......................................... Unrealized gain on derivative financial instruments .......................................... Financial income ..................................... Share of income from associate .............. Other expenses, net ................................. Segment income or loss ......................... Panamax/LR1 Handymax Aframax/LR2 $ 57,901 $ (10,530) (4,826) (27,250) (3,194) (409) (3,978) — — 65,766 $ (10,902) (671) (38,390) (5,436) (450) — — — Reportable segments subtotal Corporate and eliminations MR 67,124 $ 151,716 (52,561) (4,830) (1,963) (73) (27,772) (45,756) (30,920) (3,067) (2,315) (237) — — — — — — $ 342,507 $ (78,823) (7,533) (139,168) (42,617) (3,411) (3,978) — — 300 $ — — — — (44,718) — 51,419 10,924 Total 342,807 (78,823) (7,533) (139,168) (42,617) (48,129) (3,978) 51,419 10,924 — — — — — — — (509) — — — — — — — — 7,714 $ — 2 — — 9,919 $ — 1 — — 12,653 $ — 8 — (51) 36,142 $ $ — (509) (13,895) (20,261) (13,895) (20,770) — — 11 — (51) 66,428 $ 17 264 192 1,473 (52) (14,337) $ 17 264 203 1,473 (103) 52,091 F-46 For the year ended December 31, 2013 In thousands of U.S. dollars Vessel revenue ......................................... $ Vessel operating costs ............................. Voyage expenses ..................................... Charterhire ............................................... Depreciation ............................................ General and administrative expenses ...... Write down of vessels held for sale ........ Gain on sale of VLGCs ........................... Financial expenses ................................... Realized gain on derivative financial instruments .......................................... Unrealized gain on derivative financial instruments .......................................... Financial income ..................................... Share of income from associate .............. Other expenses, net ................................. Segment income or loss ......................... $ Panamax/LR1 Handymax Aframax/LR2 Reportable segments subtotal Corporate and eliminations MR 36,205 $ (2,648) (11) (31,086) (1,292) (118) — — — 28,204 $ 101,488 (20,069) (3,211) (977) — (40,753) (13,278) (1,030) — — — (29,341) (1,750) (154) (6,185) — (847) $ 207,580 $ (40,204) (4,846) (115,543) (23,595) (1,838) (21,187) — (847) — $ — — — — (23,950) — 41,375 (1,858) Total 207,580 (40,204) (4,846) (115,543) (23,595) (25,788) (21,187) 41,375 (2,705) — — — 3 — 3 41,683 $ (14,276) (3,858) (14,363) (7,275) (536) (15,002) — — 3 186 — — — (13,438) $ — — — — 1,050 $ — — — (10) (13,294) $ — 4 — (21) 25,364 $ 186 4 — (31) (318) $ 381 1,143 369 (127) 17,333 $ 567 1,147 369 (158) 17,015 All of our operating segments contained revenue from at least one major customer representing greater than 10% of total revenue. The revenue from those customers within their respective segments was as follows: In thousands of U.S. dollars Segment MR ........................................ Handymax ............................. Panamax/LR1 ....................... LR2 ....................................... Customer Scorpio MR Pool Ltd (1) Scorpio Handymax Tanker Pool Ltd (1) Scorpio Panamax Tanker Pool Ltd (1) Scorpio LR2 Pool Ltd (1) $ $ (1) These customers are related parties as described in Note 15. 14. Common shares Share issuances For the year ended December 31, 2014 2013 2015 315,925 138,736 34,613 208,132 697,406 $ $ 112,826 54,052 46,925 67,054 280,857 $ 89,597 36,199 36,018 28,203 $ 190,017 In May 2015, we closed on the sale of 17,177,123 newly issued shares of our common stock in an underwritten offering at an offering price of $9.30 per share. We received aggregate net proceeds of $152.1 million, after deducting the underwriters’ discounts and offering expenses of $7.6 million. 2010 Equity Incentive Plan Issuances On June 18, 2010, we issued 559,458 shares of restricted stock to our employees for no cash consideration. The share price at the date of issue was $10.99 per share. The vesting schedule of the restricted stock was (i) one-third of the shares vested on April 6, 2013, (ii) one-third of the shares vested on April 6, 2014, and (iii) one-third of the shares vested on April 6, 2015. On June 18, 2010, we issued 9,000 shares of restricted stock to our independent directors for no cash consideration. The share price at the date of issue was $10.85 per share and these shares vested on April 6, 2011. On January 31, 2011, we issued 281,000 shares of restricted stock to our employees for no cash consideration. The share price at the date of issue was $9.83 per share. The vesting schedule of the restricted stock was (i) one-third of the shares vested on January 31, 2012, (ii) one-third of the shares vested on January 31, 2013, and (iii) one-third of the shares vested on January 31, 2014. On January 31, 2011, we issued 9,000 shares of restricted stock to our independent directors for no cash consideration. The share price at the date of issue was $9.83 per share. These shares vested on January 31, 2012. F-47 On January 31, 2012, we issued 281,000 shares of restricted stock to employees for no cash consideration. The share price at the date of issue was $5.65 per share. The vesting schedule of the restricted stock was (i) one-third of the shares vested on January 31, 2013, (ii) one-third of the shares vested on January 31, 2014, and (iii) one-third of the shares vested on January 31, 2015. On January 31, 2012, we issued 9,000 shares of restricted stock to our independent directors for no cash consideration. The share price at the date of issue was $5.65 per share. These shares vested on January 31, 2013. 2013 Equity Incentive Plan In April 2013, we adopted an equity incentive plan, which we refer to as the 2013 Equity Incentive Plan, under which directors, officers, employees, consultants and service providers of us and our subsidiaries and affiliates are eligible to receive incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and unrestricted common stock. We reserved a total of 5,000,000 common shares for issuance under the plan which was subsequently revised as follows: • • • In October 2013, we reserved an additional 6,376,044 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. In September 2014, we reserved an additional 1,088,131 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. In May 2015, we reserved an additional 1,755,443 common shares, par value $0.01 per share, for issuance pursuant to the plan. All other terms of the plan remained unchanged. Under the terms of the plan, stock options and stock appreciation rights granted under the plan will have an exercise price equal to the fair market value of a common share on the date of grant, unless otherwise determined by the plan administrator, but in no event will the exercise price be less than the fair market value of a common share on the date of grant. Options and stock appreciation rights will be exercisable at times and under conditions as determined by the plan administrator, but in no event will they be exercisable later than ten years from the date of grant. The plan administrator may grant shares of restricted stock and awards of restricted stock units subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator. Following the vesting of a restricted stock unit, the award recipient will be paid an amount equal to the number of vested restricted stock units multiplied by the fair market value of a common share on the date of vesting, which payment may be paid in the form of cash or common shares or a combination of both, as determined by the plan administrator. The plan administrator may grant dividend equivalents with respect to grants of restricted stock units. Adjustments may be made to outstanding awards in the event of a corporate transaction or change in capitalization or other extraordinary event. In the event of a “change in control” (as defined in the plan), unless otherwise provided by the plan administrator in an award agreement, awards then outstanding will become fully vested and exercisable in full. Our board of directors may amend or terminate the plan and may amend outstanding awards, provided that no such amendment or termination may be made that would materially impair any rights, or materially increase any obligations, of a grantee under an outstanding award. Shareholder approval of plan amendments will be required under certain circumstances. Unless terminated earlier by our board of directors, the plan will expire ten years from the date the plan is adopted. In the second quarter of 2013, we issued 4,610,000 shares of restricted stock to our employees and 390,000 shares to our independent directors for no cash consideration. The weighted average share price on the issuance dates was $8.69 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vested on March 10, 2016, (ii) one-third of the shares vest on March 10, 2017, and (iii) one-third of the shares vest on March 10, 2018. The vesting schedule of the restricted stock to our independent directors is (i) one-third of the shares vested on March 10, 2014, (ii) one- third of the shares vested on March 10, 2015, and (iii) one-third of the shares vested on March 10, 2016. In October 2013, we issued 3,749,998 shares of restricted stock to our employees and 250,000 shares to our independent directors for no cash consideration. The weighted average share price on the issuance date was $9.85 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on October 11, 2016, (ii) one- third of the shares vest on October 11, 2017, and (iii) one-third of the shares vest on October 11, 2018. The vesting schedule of the restricted stock to our independent directors is (i) one-half of the shares vested on October 11, 2014 and (ii) one-half of the shares vested on October 11, 2015. F-48 In February 2014, we issued 2,011,000 shares of restricted stock to our employees and 145,045 shares to our independent directors for no cash consideration. The weighted average share price on the issuance date was $9.30 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on February 21, 2017, (ii) one- third of the shares vest on February 21, 2018, and (iii) one-third of the shares vest on February 21, 2019. The vesting schedule of the restricted stock to our independent directors is (i) one-third of the shares vested on February 21, 2015, (ii) one-third of the shares vested on February 21, 2016, and (iii) one-third of the shares vest on February 21, 2017. In May and September 2014, we issued 213,000 and 5,000 shares of restricted stock to SSH employees, respectively, for no cash consideration. The share prices on the issuance dates were $8.89 per share and $9.13 per share, respectively. The vesting schedule of the restricted stock to SSH employees is (i) one-third of the shares vest on February 21, 2017, (ii) one-third of the shares vest on February 21, 2018, and (iii) one-third of the shares vest on February 21, 2019. In November 2014, we issued 938,131 shares of restricted stock to our employees and 50,000 shares to our independent directors for no cash consideration. The share price on the issuance date was $8.57 per share. The vesting schedule of the restricted stock to our employees is (i) one-third of the shares vest on November 18, 2017, (ii) one-third of the shares vest on November 18, 2018, and (iii) one-third of the shares vest on November 18, 2019. The restricted shares issued to our independent directors vested on November 18, 2015. In July 2015, we issued 1,466,944 shares of restricted stock to our employees, 100,000 shares to our directors and 290,500 to SSH employees for no cash consideration. The share price on the issuance date was $10.32 per share. The vesting schedule of the restricted stock issued to our employees and SSH employees is (i) one-third of the shares vest on June 4, 2018, (ii) one-third of the shares vest on June 4, 2019, and (iii) one-third of the shares vest on June 4, 2020. The restricted shares issued to our directors vest on June 4, 2016. The following is a summary of activity for restricted stock awards during the years ended December 31, 2015 and 2014: Outstanding and non-vested, December 31, 2013 ...................................... Granted .......................................................................................... Vested ........................................................................................... Outstanding and non-vested, December 31, 2014 ...................................... Granted .......................................................................................... Vested ........................................................................................... Outstanding and non-vested, December 31, 2015 ...................................... Number of Shares 9,653,970 3,362,176 (628,819) 12,387,327 1,857,444 (633,501) 13,611,270 Weighted Average Grant Date Fair Value $ $ 9.21 9.05 9.33 9.16 10.32 9.19 9.32 Compensation expense is recognized ratably over the vesting periods for each tranche using the straight-line method. Assuming that all the restricted stock will vest, the stock compensation expense in future periods, including that related to restricted stock issued in prior periods will be: In thousands of U.S. dollars For the year ending December 31, 2016 ........................... For the year ending December 31, 2017 ........................... For the year ending December 31, 2018 ........................... For the year ending December 31, 2019 ........................... For the year ending December 31, 2020 ........................... Employees 27,957 $ 18,297 8,723 2,524 518 58,019 $ F-49 Directors 747 21 — — — 768 $ $ Total 28,704 18,318 8,723 2,524 518 58,787 $ $ Dividend Payments The following dividends were paid during the years ended December 31, 2015 and 2014: Dividends per share 0.08 0.09 0.10 0.12 0.12 0.125 0.125 0.125 $ $ $ $ $ $ $ $ Date Paid March 26, 2014 June 12, 2014 September 10, 2014 December 12, 2014 March 30, 2015 June 10, 2015 September 4, 2015 December 11, 2015 2014 Stock Buyback Program In April 2014, we resumed purchasing shares under our stock buyback program that was authorized in July 2010. Additionally, in April 2014, our board of directors approved a new stock buyback program with authorization to purchase up to $100.0 million of shares of our common stock, replacing the program announced in July 2010. In June 2014, our board of directors approved a new stock buyback program with authorization to purchase up to $150 million of shares of the Company’s common stock. This program replaced our stock buyback program that was approved in April 2014. In July 2014, our board of directors approved a new stock buyback program with authorization to purchase up to $150 million of shares of the Company’s common stock. This program replaced our stock buyback program that was approved in June 2014. During 2014, the Company acquired an aggregate of 37,579,136 of its common shares that are being held as treasury shares, which include (i) 19,951,536 common shares that were purchased in the open market at an average price of $9.09 per share, (ii) 7,500,000 common shares that were acquired in exchange for 3,422,665 shares in Dorian and (iii) 10,127,600 common shares that were acquired using part of the proceeds we received from the issuance of our Convertible Notes in June 2014. 2015 Securities Repurchase Program In May 2015, our Board of Directors authorized a new Securities Repurchase Program to purchase up to an aggregate of $250 million of our common stock and bonds, which currently consist of our (i) Convertible Notes, (ii) Senior Notes Due 2020 (NYSE: SBNA), and (iii) Senior Notes Due 2017 (NYSE: SBNB). This program replaces our stock buyback program that was previously announced in July 2014 and was terminated in conjunction with this new repurchase program. During the year ended December 31, 2015, we have acquired the following: • an aggregate of 8,273,709 of our common shares that are being held as treasury shares at an average price of $9.19 per share (7,527,070 shares were purchased at an average price at $9.32 under the May 2015 $250 million Securities Repurchase Program; the remaining 746,639 shares were purchased at an average price of $7.91 per share in the first quarter of 2015 under the July 2014 stock buyback program). • $1.5 million face value of our Convertible Notes at an average price of $1,088.10 per $1,000 principal amount (all of the Convertible Notes were purchased under the May 2015 $250 million Securities Repurchase Program). See Note 11 for a description of this transaction. We had $178.2 million remaining under our Securities Repurchase Program as of December 31, 2015. We expect to repurchase any securities in the open market, at times and prices that are considered to be appropriate, but we are not obligated under the terms of the program to repurchase any securities. As of December 31, 2015, there were 47,023,832 common shares held in treasury. F-50 Shares outstanding In May 2014, our shareholders approved an amendment to our Amended and Restated Articles of Incorporation to increase our authorized common stock to 400,000,000 from 250,000,000. Accordingly, we currently have 425,000,000 registered shares of which 400,000,000 are designated as common shares with a par value of $0.01 and 25,000,000 designated as preferred shares with a par value of $0.01. As of December 31, 2015, we had 175,335,400 shares outstanding. These shares provide the holders with rights to dividends and voting rights. 15. Related party transactions Transactions with entities controlled by the Lolli-Ghetti family (herein referred to as related party affiliates) in the consolidated statements of income and balance sheets are as follows: In thousands of U.S. dollars Pool revenue(1) Scorpio MR Pool Ltd ............................................................................................ Scorpio Handymax Tanker Pool Ltd .................................................................... Scorpio Panamax Tanker Pool Ltd ....................................................................... Scorpio LR2 Pool Ltd ........................................................................................... Vessel operating costs(2) ........................................................................................ Commissions(3) ..................................................................................................... Administrative expenses(4) .................................................................................... For the year ended December 31, 2013 2014 2015 $ 315,925 138,736 34,613 208,132 (18,393) (746) (9,331) $ 112,826 54,052 46,925 67,054 (7,947) (771) (4,823) $ 89,597 36,199 36,018 28,203 (3,703) (218) (1,944) (1) These transactions relate to revenue earned in the Scorpio LR2, Scorpio Panamax, Scorpio MR, and Scorpio Handymax Tanker Pools (the Scorpio Group Pools), which are owned by Scorpio LR2 Pool Limited, Scorpio Panamax Tanker Pool Limited, Scorpio MR Pool Limited, and Scorpio Handymax Tanker Pool Limited, respectively. The Scorpio Group Pools are related party affiliates. (2) These transactions represent technical management fees charged by SSM, a related party affiliate, which are included in vessel operating costs in the consolidated statements of income. We believe our technical management fees are at arms-length rates as they were based on contracted rates that were the same as those charged to other vessels managed by SSM at the time the management agreements were entered into. In June 2013, this fee was increased to $685 per vessel per day from $548 per vessel per day for technical management. (3) These transactions represent the expense due to SCM, a related party affiliate, for commissions related to the commercial management services provided by SCM under the Commercial Management Agreement (see description below). Each vessel pays a commission of 1.25% of their gross revenue when not in the Pools. These expenses are included in voyage expenses in the consolidated statements of income. When our vessels are in the Scorpio Group Pools, SCM, the pool manager, charges fees of $300 per vessel per day with respect to our Panamax/LR1 vessels, $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus a commission of 1.50% on gross revenues per charter fixture. These are the same fees that SCM charges other vessels in these pools, including third party owned vessels. (4) We have an Administrative Services Agreement with Scorpio Services Holding Limited, or SSH, for the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. SSH is a related party to us. We reimburse SSH for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. SSH also arranges vessel sales and purchases for us. The services provided to us by SSH may be sub-contracted to other entities within the Scorpio Group. Additionally, our Commercial Management Agreement with SCM includes a daily flat fee charged by SCM for the vessels that are not in one of the pools managed by SCM. The flat fee is $250 per day for Panamaxes/LR1 and LR2 vessels and $300 per day for Handymax and MR vessels. F-51 • The expense for the year ended December 31, 2015 of $9.3 million included (i) the flat fee of $1.4 million charged by SCM, which was included in voyage expenses on the consolidated statement of income, (ii) administrative fees of $6.8 million charged by SSH which was included in general and administrative expenses in the consolidated statement of income, (iii) restricted stock amortization of $0.9 million, which relates to the issuance of an aggregate 508,500 shares of restricted stock to SSH employees for no cash consideration in May 2014, September 2014 and July 2015 (see Note 14 for further description of these issuances and their vesting conditions) in the consolidated statement of income and (iv) reimbursement expenses of $0.2 million that were included in general and administrative expenses in the consolidated statement of income. • The expense for the year ended December 31, 2014 of $4.8 million included (i) the flat fee of $1.3 million charged by SCM, which was included in voyage expenses in the consolidated statement of income, (ii) administrative fees of $3.1 million charged by SSH, which was included in general and administrative expenses in the consolidated statement of income, (iii) restricted stock amortization of $0.3 million, which relates to the issuance of an aggregate 218,000 shares of restricted stock to SSH employees for no cash consideration in May and September 2014, and was included in general and administrative expenses in the consolidated statement of income and (iv) the reimbursement of expenses of $0.1 million which were included in general and administrative expenses in the consolidated statement of income. • The expense for the year ended December 31, 2013 of $1.9 million included (i) the flat fee of $0.3 million charged by SCM which was included in voyage expenses in the consolidated statement of income and (ii) administrative fees of $1.6 million charged by SSH which was included in general and administrative expenses in the consolidated statement of income. We had the following balances with related parties, which have been included in the consolidated balance sheets: In thousands of U.S. dollars Assets: Accounts receivable (due from the Scorpio Group Pools) (1) ........................................................ Accounts receivable (SSM) .......................................................................................................... Accounts receivable (SCM) .......................................................................................................... Other assets (pool working capital contributions) (2) .................................................................... Liabilities: Accounts payable and accrued expenses (owed to the Scorpio Group Pools) .............................. Accounts payable and accrued expenses (SSM) ........................................................................... Accounts payable and accrued expenses (SCM) .......................................................................... Accounts payable and accrued expenses (SSH) (3) ....................................................................... Deposit from Scorpio Bulkers Inc. (4) .......................................................................................... As of December 31, 2015 2014 $ 59,475 2,348 — 19,256 $ 74,125 121 1 4,115 610 484 175 77 — 3,894 276 774 3,160 31,277 (1) Amounts include $8.6 million and $5.6 million of working capital contributions made on behalf of our vessels to the Scorpio Group Pools as of December 31, 2015 and 2014, respectively. Upon entrance into these pools, all vessels are required to make working capital contributions of both cash and bunkers. These amounts are accounted for and repaid as follows: • For vessels in the Scorpio Handymax Tanker Pool, the contribution amount is repaid, without interest, upon a vessel’s exit from each pool no later than six months after the exit date. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. • • For vessels in the Scorpio MR Pool and Scorpio Panamax Tanker Pool, the contribution amount is repaid, without interest, when such vessel has earned sufficient net revenues to cover the value of such working capital initially deposited. Accordingly, we classify such amounts as current (within accounts receivable). For vessels in the Scorpio LR2 Pool, the contribution amount is repaid, without interest, upon a vessel’s exit from each pool. Bunkers on board a vessel exiting the pool are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these contributions will not be repaid within 12 months and are thus classified as non-current within other assets on the consolidated balance sheets. For time chartered-in vessels we classify the amounts as current (within accounts receivable) or non-current (within other assets) according to the expiration of the contract. F-52 (2) Represents the non-current portion of working capital receivables as described above. (3) At December 31, 2014, this amount relates to commissions payable to SSH relating to the deliveries of eight vessels under our Newbuilding Program. (4) In December 2014, we agreed to purchase four LR2 product tankers from Scorpio Bulkers Inc., a related party, and received an option to purchase two additional LR2 product tankers. Pursuant to this agreement, we received $31.3 million as a security deposit for the scheduled installments on these vessels that were expected to occur prior to the closing date of the sale. This amount was reimbursed to Scorpio Bulkers Inc. in July 2015 upon the closing of the transaction to purchase four LR2 product tankers. The option to purchase two additional LR2 product tankers expired unexercised in May 2015. The Administrative Services Agreement with SSH includes a fee for arranging vessel purchases and sales, on our behalf, equal to 1% of the gross purchase or sale price, payable upon the consummation of any such purchase or sale. These fees are capitalized as part of the carrying value of the related vessel for a vessel purchase and are included as part of the gain or loss on sale for a vessel disposal. • During the year ended December 31, 2015, we paid SSH an aggregate fee of $12.6 million in connection with our purchase and taking delivery of 29 vessels and our sales of four vessels. Additionally, as a result of the sale of STI Highlander in 2015, we paid a $0.5 million termination fee due under the vessel’s commercial management fee agreement with SCM and $0.5 million termination fee due under the vessel’s technical management fee agreement with SSM. • During the year ended December 31, 2014, we paid SSH an aggregate fee of $26.1 million, which consisted of $11.7 million related to the purchase and delivery of 33 vessels under our Newbuilding Program, $14.0 million relating to the purchase and sale of our seven VLCCs under construction, and $0.4 million relating to the sales of Noemi and Senatore. • During the year ended December 31, 2013, we paid SSH an aggregate fee of $9.1 million, which consisted of $2.5 million related to the purchase and delivery of seven vessels under our Newbuilding Program in 2013 and $6.6 million on the purchase and subsequent sale of our VLGC business to Dorian in November 2013. In 2011, we also entered into an agreement to reimburse costs to SSM as part of its supervision agreement for newbuilding vessels. During the years ended December 31, 2014 and 2013, we were charged $0.02 million, and $0.2 million, respectively, under this agreement. There was no payment in 2015. Key management remuneration The table below shows key management remuneration for the years ended December 31, 2015, 2014 and 2013: In thousands of U.S. dollars Short-term employee benefits (salaries) .............................................................. Share-based compensation (1) ............................................................................... For the year ended December 31, 2013 2014 2015 $ $ 15,601 $ 26,911 42,512 $ 7,454 23,553 31,007 $ $ 5,433 10,274 15,707 (1) Represents the amortization of restricted stock issued under our equity incentive plans as described in Note 14. For the purpose of the table above, key management are those persons who have authority and responsibility for making strategic decisions, and managing operating, financial and legal activities. There are no post-employment benefits. 16. Vessel revenue During the year ended December 31, 2015 and 2014, we had six and four vessels that earned revenue through long- term time-charter contracts (with initial terms of one year or greater), respectively. The remaining vessels earned revenue from the Scorpio Group Pools or in the spot market. During the year ended December 31, 2013, all revenue was generated from vessels operating in the Scorpio Group Pools or in the spot market. F-53 Revenue Sources In thousands of U.S. dollars Pool revenue .............................................................................. Voyage revenue (spot market) ................................................... Time charter revenue ................................................................. Other revenue ............................................................................. $ $ 17. Charterhire $ For the year ended December 31, 2013 2014 190,017 280,857 17,563 48,112 — 13,538 — 300 207,580 342,807 2015 697,406 38,259 19,896 150 755,711 $ $ $ The following table depicts our time or bareboat chartered-in vessel commitments during the year ended December 31, 2015: Name Active as of December 31, 2015 1 Kraslava ...................................................... 2 Krisjanis Valdemars .................................... Iver Prosperity ............................................ 3 4 Miss Mariarosaria ....................................... 5 Vukovar ...................................................... 6 Targale ........................................................ 7 Gan-Trust .................................................... 8 King Douglas .............................................. 9 Hellespont Progress .................................... 10 Densa Crocodile .......................................... 11 Densa Alligator ........................................... 12 STI Lombard ............................................... Time Charters That Expired In 2015 1 USMA ......................................................... 2 FPMC P Ideal ............................................. 3 Fair Seas...................................................... 4 Southport ..................................................... Jinan ............................................................ 5 6 Nave Orion .................................................. 7 FPMC P Hero ............................................. 8 Histria Azure ............................................... 9 SN Azzurra ................................................. 10 SN Federica ................................................ 11 Khawr Aladid .............................................. 12 Histria Coral ................................................ 13 Swarna Jayanti ............................................ 14 FPMC P Eagle ............................................ 15 Histria Perla ................................................ Year built Type Delivery (1) Charter Expiration Rate ($/ day) (2) (3) (4) (5) (6) (7) (8) 2007 2007 2007 2011 2015 2007 2013 2008 2006 2015 2013 2015 2007 2012 2008 2008 2003 2013 2011 2007 2003 2003 2006 2006 2010 2009 2005 January-11 Handymax February-11 Handymax Handymax September-13 MR MR MR MR LR1 LR1 LR2 LR2 LR2 MR LR2 LR2 LR2 Handymax MR LR2 Handymax LR1 LR1 LR2 Handymax LR2 LR1 Handymax May-15 May-15 May-12 January-13 August-13 March-14 February-15 September-13 August-15 January-13 January-13 January-13 December-13 April-13 March-13 April-13 April-12 December-13 February-13 August-13 July-11 March-14 September-12 July-11 May-16 May-16 April-16 May-16 May-18 May-16 January-17 January-16 March-16 February-17 September-16 May-16 January-15 January-15 March-15 February-15 April-15 April-15 May-15 June-15 June-15 September-15 August-15 October-15 October-15 October-15 November-15 14,150 14,150 13,500 15,250 17,034 15,200 17,500 15,000 16,250 22,600 24,875 10,000 14,500 15,500 17,500 15,700 12,600 14,300 15,500 13,550 13,600 12,500 15,400 13,550 16,250 14,525 13,550 (1) Represents delivery date or estimated delivery date. (2) We have an option to extend the charter for an additional year at $16,350 per day. (3) We have an option to extend the charter for an additional year at $16,200 per day. (4) The daily base rate for the first year was $15,750 per day, the rate for the second year was $16,250 per day, and the rate for the third year is $16,750 per day. In October 2015, we extended the charter for an additional year at $17,500 per day effective January 2016. We have an option to extend the charter for an additional year at $18,000 per day. (5) In February 2016, we extended the charter for an additional year at $17,250 per day effective March 2016. F-54 (6) In November 2015, we extended the charter for an additional year at $22,600 per day effective February 2016. We have entered into an agreement with a third party whereby we split all of the vessel’s profits and losses above or below the daily base rate. (7) We have an option to extend the charter for an additional year at $26,925 per day. (8) This agreement is being accounted for as a finance lease as described in Note 11. This vessel was delivered in August 2015 under a bareboat charter-in agreement for $10,000 per day for up to nine months. We are obligated to take ownership of the vessel and pay the remaining 90% of the contract price at the conclusion of the bareboat (or at any point prior, at the Company’s discretion). The undiscounted remaining future minimum lease payments under these arrangements as of December 31, 2015 are $47.4 million. The obligations under these agreements will be repaid as follows: In thousands of U.S. dollars Less than 1 year ............................................................................................................................... 1 - 5 years ........................................................................................................................................ As of December 31, 2015 $ 38,033 9,399 $ 47,432 2014 $ 57,878 2,169 $ 60,047 During the years ended December 31, 2015, 2014 and 2013, our charterhire expense was $96.9 million, $139.2 million and $115.5 million, respectively. Other income from chartered-in vessel In September 2015, we received a payment of $1.4 million as compensation for the early termination a time charter- in vessel from the vessel owner. 18. General and administrative expenses General and administrative expenses primarily represent employee benefit expenses, professional fees and administration/commercial management fees (see Note 15). Employee benefit expenses consist of: In thousands of U.S. dollars Short term employee benefits (salaries) ....................................................................... $ 19,978 33,687 Share based compensation (see Note 14) ..................................................................... $ 53,665 2015 For the year ended December 31, 2013 2014 $ 6,673 $ 9,268 13,142 29,726 $ 19,815 $ 38,994 19. Financial expenses Financial expenses consist of: In thousands of U.S. dollars Interest payable on debt (1) ............................................................................................ Amortization of deferred financing fees (2) ................................................................... Commitment fees on undrawn portions of debt ............................................................ For the year ended December 31, 2013 2014 982 $ 15,888 332 4,834 1,391 48 $ 2,705 $ 20,770 2015 $ 72,178 17,418 — $ 89,596 $ (1) The increase in interest payable in each year is primarily attributable to increases in the Company’s debt balance. Average debt outstanding during the years ended December 31, 2015, 2014 and 2013 was $1,941.0 million, $783.9 million and $176.7 million, respectively. Interest payable during those periods was reduced by interest capitalized as part of our Newbuilding Program (as described in Note 5) of $5.6 million, $16.6 million and $5.7 million, respectively. F-55 (2) The increase in the amortization of deferred financing fees in each year was primarily due to an increase in financing fees incurred on the delivery of the vessels under our Newbuilding Program and the issuance of our Senior Notes Due 2017, Senior Notes Due 2020 and Convertible Notes during the year ended December 31, 2014. Amortization of deferred financing fees was reduced by the capitalization of deferred financing fee amortization as part of our Newbuilding Program (as described in Note 5) of $0.8 million and $0.7 million during the years ended December 31, 2014 and 2013, respectively. No deferred financing amortization was capitalized during the year ended December 31, 2015. The amortization of deferred financing fees in the years ended December 31, 2015 and 2014 included charges of $2.7 million and $0.3 million, respectively for the write-offs of deferred financing fees during those periods. 20. Tax Scorpio Tankers Inc. and its subsidiaries are incorporated in the Republic of the Marshall Islands, and in accordance with the income tax laws of the Marshall Islands, are not subject to Marshall Islands’ income tax. Based upon review of applicable laws and regulations, and after consultation with counsel, we do not believe we are subject to material income taxes in any jurisdiction, including the United States of America. Therefore, we did not have any tax charges, benefits, or balances as of or for the periods ended December 31, 2015, 2014 and 2013. 21. Earnings per share The calculation of both basic and diluted earnings per share is based on net income attributable to equity holders of the parent and weighted average outstanding shares of: In thousands of U.S. dollars except for share data Net income attributable to equity holders of the parent - basic ..... Convertible Notes interest expense ............................................ Convertible Notes deferred financing amortization ................... $ Net income attributable to equity holders of For the year ended December 31, 2014 2013 2015 $ 217,749 19,630 1,756 $ 52,091 — — 17,015 — — the parent - diluted .................................................................... $ 239,135 $ 52,091 $ 17,015 Basic weighted average number of shares ..................................... Effect of dilutive potential basic shares: Restricted stock .............................................................................. Convertible Notes ....................................................................... Diluted weighted average number of shares .................................. 161,436,449 171,851,061 146,504,055 7,323,893 30,978,983 38,302,876 199,739,325 4,441,741 — 4,441,741 176,292,802 1,835,323 — 1,835,323 148,339,378 Earnings Per Share: Basic ........................................................................................... Diluted ........................................................................................ $ $ 1.35 1.20 $ $ 0.30 0.30 $ $ 0.12 0.11 The dilutive effect of 38,302,876 shares for the year ended December 31, 2015 relates to 31,791,435 potentially dilutive shares relating to our Convertible Notes and 13,611,270 unvested restricted shares. The dilutive effect of 4,441,741 and 1,835,323 shares of restricted stock for the years ended December 31, 2014 and 2013 is related to 12,387,327 and 9,653,970 unvested restricted shares, respectively. Convertible Notes interest expense, deferred financing amortization and the potentially dilutive securities relating to the conversion of the Convertible Notes (representing 15,015,451 shares of common stock) were excluded from the computation of diluted earnings per share for the year ended December 31, 2014 because their effect would have been anti- dilutive under the if-converted method. 22. Financial instruments Funding and capital risk management We manage our funding and capital resources to ensure our ability to continue as a going concern while maximizing the return to the shareholder through optimization of the debt and equity balance. F-56 IFRS 13 requires classifications of fair value measures into Levels 1, 2 and 3. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair values and carrying values of the Company’s financial instruments at December 31, 2015 and 2014, respectively, are shown in the table below. Categories of Financial Instruments Amounts in thousands of U.S. dollars Financial assets Cash and cash equivalents (1) ................................. Loans and receivables (2) ....................................... Available for sale investment (3) ........................... Financial liabilities Accounts payable (4) .............................................. Accrued expenses (4) ............................................. Derivatives designated in a cash flow hedge (5) .... Derivatives at fair value through profit or loss (5) .................................................. Secured bank loans (6) ........................................... Finance lease (7) ..................................................... Unsecured Senior Notes Due 2020 (8) ................... Unsecured Senior Notes Due 2017 (8) ................... Convertible Notes (9) ............................................. As of December 31, 2015 Fair value Carrying Value As of December 31, 2014 Fair value Carrying Value $ $ $ 200,970 69,017 — $ 25,683 32,643 — 1,255 1,586,396 53,372 47,300 51,129 334,301 $ $ 200,970 69,017 — 25,683 32,643 — 1,255 1,586,396 53,372 53,750 51,750 358,500 $ $ 116,143 78,201 130,456 14,929 55,139 77 128 1,173,672 — 46,591 49,577 347,292 116,143 78,201 130,456 14,929 55,139 77 128 1,173,672 — 53,750 51,750 360,000 (1) Cash and cash equivalents are considered Level 1 items as they represent liquid assets with short-term maturities. (2) We consider that the carrying amount of accounts receivable approximate their fair value due to the relative short maturity of these instruments. (3) The available for sale investment relates to our investment in Dorian. We considered this investment as a Level 1 item as its share price is quoted on an active market under the symbol ‘LPG’ on the New York Stock Exchange. This investment was sold in July 2015 as described in Note 8. (4) We consider that the carrying amount of accounts payable and accrued expenses approximate the fair value due to the relative short maturity of these instruments. (5) Derivative financial instruments in 2015 and 2014 consisted of the following: • Interest rate swaps which are recorded at the present value of future cash flows estimated and discounted based on the applicable yield curves which are derived from observable, quoted interest rates to determine the fair value. As such, we classify these liabilities as Level 2 fair value measurements. • A profit or loss sharing agreement with a third party on a time-chartered in vessel that stipulates that 50% of the profits or losses relating to Densa Crocodile above or below the vessel’s time charter rate are shared with a third party who neither owns nor operates the vessel. This instrument is recorded at the present value of estimated future cash flows which are derived from observable time charter rates and discounted based on the applicable yield curves to determine the fair value. As such, we classify this liability as a Level 2 fair value measurement. (6) The carrying value of our secured bank loans are measured at amortized cost using the effective interest method. We consider that their carrying value approximates fair value. These amounts are shown net of $46.7 million and $35.5 million of unamortized deferred financing fees as of December 31, 2015 and 2014, respectively. F-57 (7) We consider that the carrying value of our finance lease approximates fair value due to the relative short maturity of the instrument. (8) The carrying value of our Unsecured Senior Notes Due 2020 and 2017 are measured at amortized cost using the effective interest method. The carrying values shown in the table are the face value of the notes. These notes are shown net of $1.1 million and $1.4 million of unamortized deferred financing fees, respectively, on our consolidated balance sheet as of December 31, 2015. Our Senior Notes Due 2020 and 2017 are quoted on the New York Stock Exchange under the symbols ‘SBNA’ and ‘SBNB’, respectively. We consider their fair values to be Level 1 measurements due to their quotation on an active exchange. (9) The carrying value of our Convertible Notes shown in the table above is its face value. The liability component of the Convertible Notes has been recorded within Long-term debt on the consolidated balance sheet as of December 31, 2015, net of $6.5 million of unamortized deferred financing fees. The equity component of the Convertible Notes has been recorded within Additional paid-in capital on the consolidated balance sheet, net of $1.9 million of deferred financing fees. We consider its fair value to be a Level 2 measurement. Financial risk management objectives We identify and evaluate significant risks on an ongoing basis with the objective of managing the sensitivity of our results and financial position to those risks. These risks include market risk, credit risk, liquidity risk and foreign exchange risk. The use of financial derivatives is governed by our policies as approved by the board of directors. Market risk Our activities expose us to the financial risks of changes in interest rates. In the years ended December 31, 2015, 2014, and 2013, we were party to interest rate swaps to mitigate the risk of rising interest rates. In August 2011, we entered into six interest rate swap agreements to manage interest costs and the risk associated with changing interest rates on our 2011 Credit Facility and 2010 Revolving Credit Facility with three different banks. We terminated the three interest rate swaps under our 2010 Revolving Credit Facility and the three interest rate swaps under our 2011 Credit Facility expired in June 2015. Details of the amounts recorded in the consolidated statement of income and statement of other comprehensive income in respect of such instruments are provided in Note 12. Sensitivity analysis - Interest rate risk The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at balance sheet date was outstanding for the whole year. If interest rates had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31, 2015 would have decreased/increased by $13.9 million. This is mainly attributable to our exposure to interest rate movements on our variable interest rate credit facilities as described in Note 11. If interest rates had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31, 2014 would have decreased/increased by $2.5 million. This is mainly attributable to our exposure to interest rate movements on our 2011 Credit Facility, Newbuilding Credit Facility, 2013 Credit Facility, KEXIM Credit Facility and K-Sure Credit Facility. If interest rates had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31, 2013 would have decreased/increased by $0.2 million. This is mainly attributable to our exposure to interest rate movements on our 2011 Credit Facility, STI Spirit Credit Facility and Newbuilding Credit Facility. Credit risk Credit risk is the potential exposure of loss in the event of non-performance by customers and derivative instrument counterparties. We only place cash deposits with major banks covered with strong and acceptable credit ratings. F-58 Accounts receivable are generally not collateralized; however, we believe that the credit risk is partially offset by the creditworthiness of our counterparties including the commercial and technical managers. We did not experience material credit losses on our accounts receivables portfolio in the years ended December 31, 2015, 2014, and 2013. The carrying amount of financial assets recognized in our consolidated financial statements represents the maximum exposure to credit risk without taking account of the value of any collateral obtained. We did not experience any impairment losses on financial assets in the years ended December 31, 2015, 2014, and 2013. We monitor exposure to credit risk, and believe that there is no substantial credit risk arising from counterparties. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. We manage liquidity risk by maintaining adequate reserves and borrowing facilities and by continuously monitoring forecast and actual cash flows. Current economic conditions make forecasting difficult, and there is the possibility that our actual trading performance during the coming year may be materially different from expectations. Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, we believe that we have adequate financial resources to continue in operation and meet our financial commitments (including but not limited to newbuilding installments, debt service obligations and charterhire commitments) for a period of at least twelve months from the date of approval of these consolidated financial statements. Accordingly, we continue to adopt the going concern basis in preparing our financial statements. Remaining contractual maturity on secured and unsecured credit facilities The following table details our remaining contractual maturity for our secured and unsecured credit facilities. The amounts represent the future undiscounted cash flows of the financial liability based on the earliest date on which we can be required to pay. The table includes both interest and principal cash flows and takes into consideration any amounts fixed via the interest rate swaps discussed above. As the interest cash flows are not fixed, the interest amount included has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date. To be repaid as follows: In thousands of U.S. dollars Less than 1 month ................................................................................................................ 1-3 months ........................................................................................................................... 3 months to 1 year ................................................................................................................ 1-5 years .............................................................................................................................. 5+ years ............................................................................................................................... As of December 31, 2014 2015 $ 28,065 41,901 187,305 1,700,643 525,888 $ 2,483,802 $ 5,001 45,932 135,909 1,357,945 434,865 $ 1,979,652 All other current liabilities fall due within less than one month. The following table details our remaining contractual maturity for derivative financial instruments (which include the profit or loss sharing agreement and the interest rate swaps). The amounts represent the future undiscounted cash flows of the financial liability based on the earliest date on which we can be required to pay. In thousands of U.S. dollars Less than 1 month ............................................................................................................... 1-3 months .......................................................................................................................... 3 months to 1 year ............................................................................................................... 1-5 years ............................................................................................................................. As of December 31, 2014 2015 $ $ — 320 880 83 1,283 $ $ — 125 81 — 206 F-59 Foreign Exchange Rate Risk Our primary economic environment is the international shipping market. This market utilizes the U.S. Dollar as its functional currency. Consequently, virtually all of our revenues and the majority of our operating expenses are in U.S. Dollars. However, we incur some of our combined expenses in other currencies, particularly the Euro. The amount and frequency of some of these expenses (such as vessel repairs, supplies and stores) may fluctuate from period to period. Depreciation in the value of the U.S. dollar relative to other currencies will increase the U.S. dollar cost of us paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations. There is a risk that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect against currency fluctuations. However, we have some ability to shift the purchase of goods and services from one country to another and, thus, from one currency to another, on relatively short notice. We may seek to hedge this currency fluctuation risk in the future. 23. Subsequent events Agreement to Sell Five MR Product Tankers In February 2016, we reached an agreement with an unrelated third party to sell five 2014 built MR product tankers (STI Lexington, STI Powai, STI Chelsea, STI Olivia and STI Mythos) for approximately $33.3 million each. The sale of STI Lexington closed in March 2016 and the sales of the remaining four vessels are expected to close by June 2016. As a result of the closing of the sale of STI Lexington, we repaid $18.4 million on our K-Sure Credit Facility and expect to write-off $0.7 million of deferred financing fees during the first quarter of 2016. We expect to record an aggregate write-down on the sales of all five vessels of approximately $3.2 million during the first quarter of 2016 in connection with these transactions. We also expect to write-off an aggregate of approximately $2.6 million of deferred financing fees for the sales of the four vessels that have not closed as of March 17, 2016. These fees will be written-off on or around the closing date of each sale (when the corresponding debt is repaid). Dividend Declaration On February 25, 2016, the Scorpio Tankers’ Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on March 30, 2016 to all shareholders of record as of March 10, 2016. ING Credit Facility In March 2016, we amended and restated our ING Credit Facility to increase the borrowing capacity to $132.5 million from $87.0 million. The remaining terms and conditions of the facility remained unchanged and the proceeds from the increased borrowing capacity are expected to be used to partially finance the purchase of STI Lombard (currently bareboat chartered-in) and refinance the existing indebtedness on an MR product tanker (2015 built). In March 2016, we drew down $26.0 million on our ING Credit Facility to finance the delivery of STI Grace, which is scheduled to occur on March 18, 2016. $250 Million Securities Repurchase Program Since January 1, 2016 through the date of this report, we have acquired an aggregate of 2,299,606 of our common shares that are being held as treasury shares at an average price of $5.96 per share. We have $164.5 million remaining under our Securities Repurchase Program as of the date of this report. We expect to repurchase any securities in the open market, at times and prices that are considered to be appropriate by us, but are not obligated under the terms of the program to repurchase any securities. There are 173,035,794 shares outstanding as of the date of this report. Convertible Senior Notes due 2019 On March 10, 2016, the conversion rate of our Convertible Notes was adjusted to reflect a cash dividend with respect to our common shares. The new conversion rate for the Convertible Notes was adjusted to 90.5311 of our common shares per $1,000 principal amount of the Convertible Notes, representing an increase of the prior conversion rate of 1.8521 shares for each $1,000 principal amount of the Convertible Notes. F-60 Time Chartered-in Vessels In February 2016, we extended the time charter on an LR1 product tanker that is currently time chartered-in. The term of the agreement is for an additional year at $17,250 per day effective March 2016. In March 2016, we entered into time charter-in agreements with an unrelated third party on three ice class 1A Handymax product tankers. Each agreement is for three years at $15,600 per day and we have two consecutive one year options to extend the agreements at $16,500 per day and $17,500 per day, respectively. These vessels are expected to be delivered by the end of March 2016. In addition, we have the option to time charter-in up to four additional ice class 1A Handymax product tankers under the same terms. Debt Refinancing We refinanced the outstanding indebtedness related to STI Battery by repaying $18.2 million on our 2013 Credit Facility in January 2016 and drawing down $17.25 million from our BNP Paribas Credit Facility in February 2016. F-61 CORPORATE INFORMATION S E N I O R M A N A G E M E N T A N D D I R E C T O R S EMANUELE A. LAURO Chairman & Chief Executive Officer ROBERT BUGBEE President & Director CAMERON MACKEY Chief Operating Officer & Director FILIPPO LAURO Vice President BRIAN LEE Chief Financial Officer LUCA FORGIONE General Counsel ANOUSHKA KACHELO Company Secretary ADEMARO LANZARA Director DONALD TRAUSCHT Director ALEXANDRE ALBERTINI Director MARIANNE ØKLAND Director JOSE TARRUELLA Director C O R P O R A T E O F F I C E S Monaco Le Millenium 9, Boulevard Charles III MC 98000 Monaco Tel +377 9798 5716 New York 150 East 58th Street New York, NY 10155 Tel +1 212 542 1616 investor.relations@scorpiotankers.com S T O C K L I S T I N G Scorpio Tankers Inc.’s common stock is traded on the New York Stock Exchange under the symbol STNG. T R A N S F E R A G E N T Computershare 250 Royall Street Canton, MA 02021 USA L E G A L C O U N S E L Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 USA I N V E S T O R R E L A T I O N S Brian Lee Chief Financial Officer Scorpio Tankers Inc. 150 East 58th Street New York, NY 10155 Tel +1 212 542 1616 Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com ABOUT US Scorpio Tankers Inc. is a provider of marine transportation of petroleum products worldwide. As of March 31, 2016, our owned fleet consisted of 78 product tankers (19 LR2, 14 Handymax, and 45 MR tankers) with an average age of 1.5 years. Additionally, we time or bareboat charter-in 14 product tankers (three LR2, one LR1, four MR and six Handymax tankers) and have also contracted for the construction of 11 newbuilding product tankers (eight MR and three LR2 tankers). The three newbuilding LR2s are expected to be delivered throughout the remainder of 2016 (one per quarter) and the eight newbuilding MRs are expected to be delivered throughout 2017. We have also entered into agreements to sell three of our 2014 built MR product tankers, with the sales expected to close during the second quarter of 2016. Scorpio Tankers Inc. is incorporated in the Republic of the Marshall Islands and has its principal offices in Monaco and New York. Scorpio Tankers is listed on the New York Stock Exchange (NYSE) under the symbol STNG. Monaco Le Millenium—9, Boulevard Charles III—MC 98000 Monaco Tel +377 9798 5716 New York 150 East 58th Street—New York, NY 10155 Tel +1 212 542 1616 investor.relations@scorpiotankers.com

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