DHT Holdings, Inc.

Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHD Holdings' second quarter 2020 earnings call. I'm joined by DHD's co-CEOs, Svein Mosnes Harger and Trygve Munsta, and Vilhelm Klinder, head of investor relations. 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 dhtankers.com until August 18th. In addition, our earnings press release will be available on our website and on the SSC 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 DHD's prospects, dividends, share repurchases, and debt repayment, also for the tanker markets in general, daily charter high rates and vessel utilization, forecasts 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 SSE-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 $178 million and a net income of $135.8 million, or $0.92 per share. Adjusted for a non-cash change in fair value related to interest rate derivatives of $0.4 million, net income was $136.3 million, or $0.93 per share for the quarter. This sets another new record in the company's 15-year history. OPEX for the quarter was 19.7 million, or 8,000 per day average for the fleet, and G&A for the quarter was 5 million. Moving over to the balance sheet. The quarter ended with 138 million of cash. During the quarter, we prepaid $59 million under the ABN AMRO and NODIA credit facilities. The voluntary prepayments under the two facilities were made for all regular installments scheduled for 2021. Current availability under all our revolving credit facilities is $135 million. putting total liquidity at 273 million at quarter end. Financial leverage is 39.4% based on book values and 38.6% based on market values for the ship. Net debt is 582 million, which equals an average net debt of 21.5 million per vessel. Looking at the cash bridge, the quarter started with $76 million of cash and we generated $178 million in EBITDA. Ordinary debt repayment and cash interest amounted to $26 million. $52 million was paid in dividends. $10 million was used in scrubber and maintenance capex. $13.5 million was provided by scrubber financing. $59 million was used for debt prepayment. Changes in working capital amounted to $16 million, and the quarter ended with $138 million of cash. With that, I will turn the call over to Trygve.

Thank you, Laila. Let me then walk you through the operational highlights for the quarter. As you've seen from the press release, our spot VLCCs earned $92,100 per day in the second quarter. The time charter chips earned an average of $62,700 per day. Fleet-wide, the average then becomes $83,300 per day. As of today, we have covered 61% of the available spot days at an average rate of $51,400 per day. More importantly, if you are an investor on a fleet-wide basis, i.e., with the time-sharded ships included, three-quarters of the tanker days are covered at an average rate of $51,200 per day. And that is with no profit sharing on the four ships with such arrangements. Our aggressive pursuit of time-sharded opportunities earlier in the year was clearly the right strategy. With it, we have been able to extend the good times well into next year. On the cost side, the company continues to deliver stable and competitive numbers. Vessel operating expenses came in at $8,000 per day per ship for the quarter. Cash G&A amounted to $3.1 million for the quarter. Let us then turn to capital allocation. For the 42nd consecutive time, we will pay a quarterly dividend. 48 cents per share will be paid on September 2nd to shareholders on record of August 26th. The amount equals 60% of net income divided by the fully diluted share count. In the quarter, we continue to strengthen our balance sheet by prepaying almost $60 million of bank debt. Specifically, we prepaid the 2021 regular installments on our two large loan facilities. In addition to the overall deleveraging effect, this move has a significant positive impact on next year's cash break-even levels, something Svein will discuss in more detail in a minute. As you have noted, On the 17th of July, we exercised our call option on the $125 million convertible bond due August next year. The conversion price is $5.347 per share. Thursday next week is the last chance for bondholders to convert their notes into common shares. If they do not, they will be redeemed in cash at par on Friday the 21st. A potential cash redemption will be covered by cash at hand and a partial draw on our revolving credit facilities. And on a general note, we would like to add that we look forward to having this instrument retired from the capital structure. On previous occasions, we've been able to buy back convertible bonds in the open market at the discount. However, in recent quarters, this has been impossible to repeat as the bond has faded meaningfully above par At times, seemingly, as if the call option was not priced in. So in this context, we elected to call the bond at par. With that, I'll turn it over to Simon.

Thank you, Dr. Greger. The COVID-19 virus continues to present significant challenges with respect to changing crews at regular intervals. Consequently, many TFRs are serving longer periods on board than originally planned. There are too few ports and countries that facilitate crew changes and the variety of nationalities and immigration practices does not make this task any easier. Additionally, the time required for crew changes are longer than normal and result in some off-hire. At DHT, we have, however, had increasing success with crew changes. and have to date had two-thirds of our fleet in ports to change some or all the crew. This is a significant effort and achievement from both our seafarers and our shore-based staff. As previously discussed, we have taken advantage of the strong freight markets to build a meaningful book of fixed income for our fleet. Importantly, this level of fixed income covers a significant portion of the company's cash cost and lowers the required rates in order for the spot chips to cover the remaining cash costs for the company. Specifically, we estimate that our 17 spot chips need to earn $2,800 per day for the company to be cash neutral for the remainder of the year. This does not take into consideration third quarter bookings to date. Hence, we are well ahead of this number. Similarly, we estimate that the spot ships need to earn $11,400 per day to cover our cash costs in 2021. Cash break even might mean different things to different people. At DSG, it includes all true cash costs, i.e. OPEX, G&A, scheduled debt repayments, interest and maintenance capex. Both these numbers are very robust and come as a result of our TC strategy and debt prepayments. We believe that they make DHT stand apart with staying power and ability to generate cash even in weaker markets. Our industry is highly cyclical. Our industry is also very capital intensive. Further, it is essentially a spot business offering limited opportunities to build truly long-term fixed income at rewarding returns. In recognition of this, DHT's strategy is counter-cyclical. This means that we do different things depending on where we are in the business cycles. As you can see on this graph, Our actions have been very focused during troughs and peaks. In late 2013, early 2014, we expanded aggressively by acquiring 16 VCCs. In the following period, when earnings and asset values appreciated, we stopped investing and shifted our focus by paying handsome dividends, buying back bonds at a discount, securing time-chartered contracts, as well as prepaying debts. In the trough of 2017, we again expanded by acquiring 13 VLCCs at attractive prices. During the recent period of strong earnings, we have continued to execute on our well-defined strategy and extend our solid track record. This included the following three key components. One, rewarding shareholders with generous formula-based quarterly cash dividends. securing fixed income contracts for several of our ships at attractive rates, and three, allocating a significant portion of our cash flows to prepay debt and further strengthen our balance sheets. These achievements are very important in anticipation and preparation for the next step in our strategy as we expect the next leg in the market to offer attractive investment opportunities. Our balance sheet will have capacity to make meaningful investments without relying on raising additional equity. This will ensure additional investments will be accretive to earnings. Further, we enjoy excellent support from our lending banks and are confident in credit being available when required. In sum, we are now coming out of a period with exceptionally healthy freight levels and have positioned the company to be able to take advantage of attractive growth opportunities when they arise. And with that, we open up the Q&A. Operator?