DHT Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to this quarter one 2020 DHT Holdings earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press start and one on your telephone. Please be advised that this conference is being recorded and I would like to call the conference over to your first speaker today, Ms. Laila Halverson. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHD Holdings first quarter 2020 earnings call. I am joined by DHD's co-CEO, Svein Moxnes Harfjell and Trygve Munsta. As usual, we will go through financials and some highlights before we open up for your questions. The link to the slide deck can be found on our website dhtankers.com. Before we get started with today's call, I would like to make the following remarks. A replay of this conference call will be available at our website, dhtankerts.com, until May 13th. In addition, our earnings press release will be available on our website and on the SSP-Edgar system as an exhibit to our Form 6-K. As a reminder, on this conference call, we will discuss matters that are forward-looking in nature. These forward-looking statements are based on our current expectations about future events, including DHT's prospects, dividends, share repurchases and debt repayment, the outlook for the tanker market in general, daily shorter hire rates and vessel utilization, forecast of world economic activity, oil prices and oil trading patterns, anticipated levels of new building and scrapping, and projected dry dock schedules. Actual results may differ materially from the expectations reflected in these forward-looking statements. We urge you to read our periodic reports available on our website and on the SSV EDGAR system, including the risk factors in these reports, for more information regarding risks that we face. Looking at the P&L highlights, EBITDA for the quarter came in at 128 million and a net income of 72 million or 49 cents per share. Adjusted for a non-cash change in fair value related to interest rate derivatives of 12.6 million, net income was 85 million or 58 cents per share for the quarter. This sets a new record in the company's 15-year history. OPEX for the quarter was 19.8 million, or 8,100 per day average for the fleet, compared to average operating cost of 7,900 per day for 2019. The increase was mainly related to upstoring of spares and consumables in relation to IMO 2020. G&A for the quarter was 4.3 million, equal to 1,700 per ship per day. Moving over to the balance sheet, the quarter ended with $76 million of cash. During the quarter, we prepaid $58 million under the ABN AMRO credit facility, in addition to $14 million related to scheduled installments. The prepayment was made under the revolving credit facility tranche and may be reborrowed. Current availability under all revolving credit facilities is $136 million, putting total liquidity at $212 million. Financial leverage is still moderate with interest-bearing debt to total assets of 41% based on market values for the shifts. Subsequent to the quarter end, we agreed to a $36.4 million financing of DHT Jaguar, with our current lender Danish SHIB Finance. The new loan will be in direct continuation of the existing loan with a five-year tenor and will have final maturity in November 2025. The new loan has a 20-year repayment profile and will bear an interest rate equal to LIBOR plus 2%, which compares favorably to current average of 2.37%. Looking at the cash bridge, we generated $128 million in EBITDA. Ordinary debt repayment and cash interest amounted to $26 million. $47 million was paid in dividends. $3 million was used in scrubber and maintenance capex, while $58 million was used for debt prepayment. Changes in working capital amounted to 13 million, and the quarter ended with 76 million of cash. With that, I will turn the call over to Svein.

Thank you, Laila. As you could see from the cash bridge Laila presented, our capital allocation focus on two aspects. One, returning cash to our shareholders, and two, investing further in our already healthy balance sheets. We are for the first quarter returning 51 million to shareholders in the form of cash dividend of 35 cents per share, representing 60% of the adjusted net income of 58 cents per share. The dividend marks 41 consecutive quarters with cash dividends. Our other priority was to invest in our balance sheet by prepaying 58 million of bank debts. This has been applied through a revolving tranche in a credit facility and can as such be re-borrowed. Following this, our interest-bearing debt as of May 5th was 808 million. We are not allocating capital towards buying ships. Whilst we appreciate the attraction of the prospective cash return for ships in the 10 to 15 year age bracket, it would not represent a fleet renewal for us. As for brand new ships or placing orders, we do neither find prices nor technology to yet present attractive opportunities to invest. In conclusion, you should not expect DHT to employ capital towards fleet investments at this time. The COVID-19 outbreak is impacting our business in several ways. The main operational challenges relate to three areas. Firstly, as a result of quarantine policies and restrictions in ports to embark and disembark crew, our seafarers are staying on board longer than originally planned. Our seafarers are demonstrating understanding and cooperation, hence our services are continuing uninterrupted. We should take this opportunity to thank them for their fantastic efforts and support. it could prove challenging to have supplies delivered to ships. As our VLSDs regularly trade in ports such as Singapore and Fujairah, we have so far experienced very limited impact. We should thank both our seafarers and shore staff for good preparation, allowing our ships to trade as planned. Thirdly, the current reduction in consumption of refined products has caused shore storage tanks rapidly filling up, Consequently, delays to discharge the cargo could be experienced. These delays are forced floating storage and paid for by the clients through the merge rates or pre-agreed rates to store oil. And now over to the operational highlights of the quarter. Following on from a very healthy fourth quarter of 2019, the first quarter of this year continued on a strong note. Although it might be tough getting used to for our investors, the market during the first quarter was another example of significant volatility. As we have suggested many times, we encourage investors to focus on periodical averages and, importantly, on what truly matters, the earnings per share. Our spot vessels earned 66,400 a day during the quarter. Combined with a good showing from our ships on time charter with 54,000 per day during the period, our fleet earned on average 64,400 per day in the quarter. We have, as of today, booked 66% of our spot capacity for the second quarter at 110,400 per day, a significant step up from the prior two quarters. Everyone at DHT continued to work hard and efficiently both onshore and on board our ships, resulting in stable and what we believe to be very competitive costs. OPEX for the quarter was 8,100 per day, also reflecting a well-maintained quality fleet. We have a lean and competent organization, and our G&A was 4.3 million for the quarter. As we announced subsequent to quarter end, we have entered into fixed time charter contracts for six of our ships. It is in line with our strategy to try to secure some level of fixed income when rates are elevated, yet supporting business opportunities for our customers. The average daily hire for these six ships is $67,300 per day, generating significant cash flows and being highly profitable. In fact, these six time-sharter contracts are expected to generate an EBITDA contribution of about 121 million during the firm contract periods. Five of the six ships have already delivered into these contracts, with the last ship planned for delivery later this quarter. You should also note that five of these ships are in the mature end of our fleet, thereby improving the average fuel efficiency for the fleet remaining in the spot markets. We believe the size of DHT to offer ample opportunities to invest and divest, as well as having sufficient size to service clients. Importantly, in the context of the size and the decision to secure these time starters, We believe it demonstrates that a choice like this will have a meaningful impact on the company's course over the coming quarters. We wrapped up these contracts over some 10 days, proving that one can swiftly seize opportunities the weather presents to turn the boat quickly in anticipation of changing currents. Following this, we now have 10 of our ships on time charter contracts. The other four ships have fixed base rates of 31,500 per day on average with profit-sharing structures. As such, these ships participate in strong markets demonstrated by their average earnings well north of their base rates during the first quarter. And with that, over to Trigve.