DHT Holdings, Inc.

Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' first quarter 2022 earnings call. I'm joined by DHT's president and CEO, Svein Moxnes Harfjell. 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 May 17. 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 as detailed in our financial report. 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. The company continues to show a very strong and healthy balance sheet, and the quarter ended with 58.6 million of cash. At quarter end, the company's availability under both revolving credit facilities was 176.8 million, putting total liquidity at 235 million as of March 31st. Financial leverage is about 30% based on market values for the shift, and net debt per vessel was 17.8 million at quarter end, which is still below current scrap values. Looking at the P&L highlights, EBITDA for the quarter was 14.4 million, and net loss came in at 17.3 million. The result includes a non-cash gain in fair value related to interest rate derivatives of 7.9 million. The company continues to show a very good cost control with OPEX for the quarter at $18.3 million, equal to $7,800 per day per ship. G&A for the quarter was $6.8 million and includes non-recurring accruals related to the retirement of the previous co-CEO. In the first quarter of 2022, the company achieved an average TCE of $17,100 per day. For the second quarter of 2022, 69% of the available days have been booked at an average rate of $24,800 per day, and 59% of available spot days have been booked at an average rate of $19,900 per day. On the next slide, we present the cash bridge for the quarter. We started the year with $60.7 million of cash, and we generated $14.4 million in EBITDA. Ordinary debt repayment and cash interest amounted to $7.2 million, while $3.3 million was allocated to shareholders through dividend payment. And $2.3 million was used for maintenance capex. Changes in working capital amounted to 4.5 million, and we ended the quarter with 58.6 million of cash. As you will note, and despite the very challenging freight market, we did not burn any cash. Switching now to capital allocation, the company will pay a dividend of two cents per share for the quarter. It will be payable on the 26th of May, to shareholders of record as of 19th of May. This marks the 49th consecutive quarterly cash dividend. For the three remaining quarters of 2022, we estimate cash G&A of 3.3 million and non-cash G&A of 0.8 million in average per quarter. Following the sale of DHT Hawk and DHT Falcon, Depreciation for the three remaining quarters of 2022 is estimated at about $31.5 million on average per quarter. As the Scribbrs will be fully depreciated at the end of 2022, we expect annual depreciation for 2023 to be about $100 million. With that, I'll turn the call over to Swain.

Thanks, Lina. We have entered into agreement to sell the DHT Hawk and the DHT Falcon with the delivery set to take place during the second quarter. The price is 78 million for the pair and compares favorably to the combined price of 98 million that we paid for them some eight years ago. The sales are expected to generate some 12 million in combined profits and we will repay the remaining outstanding debt on the vessels amounting to about 13 million in total. Following these sales, the average age of our fleet will be reduced and our AER and EEOI metrics improved. On this slide, you will find an update of our cash break-even levels for the remainder of the year. As per usual, all true cash costs are included in our presentation, i.e. OPEX, debt amortization, interest, G&A, and maintenance capex. The numbers are best enclosed with a required rate of $15,100 per day for the fleet as a whole, and importantly, $8,500 per day for the spot ships, specifically in order for the company to be cash neutral for the remaining three quarters of 2022. On this next slide, we wanted to share an observation of the peer group within large tankers. As you will see, there is a distinct change in the development of financial leverage within this group. DHT is represented by the green line and with the lowest financial leverage. As you will recall during the last upturn, not only did we return significant monies to shareholders through quarterly cash dividends, but we also invested in the balance sheet and reduced interest-bearing debt by about 50%. Despite the recent tough markets, we have retained our balance sheet strength, and you could also note that we have no new building capex commitments. Your takeaway here should simply be that DHT has the strongest balance sheet in the group. I'll now offer some commentary on the market. We believe a market recovery to be underway, but delayed and troubled by COVID in China and geopolitics generally impacting macroeconomics. Admittedly, and given all the noise, it is very difficult to predict the near-term freight markets. But trying to look through all this noise, we see fundamentals developing towards what we expect to become a rewarding market for large tankers. Oil inventories are low, and are now likely more pronounced as energy security is increasingly becoming an issue. OPEC is so far sticking to its plan, but with underperformance by the respective members' quotas. The much-talked-about Iran deal takes longer than market observers have suggested, and the Russia-Ukraine conflict is reducing supply. The U.S. has, however, announced release from the SPRs, a release that will offer the market a double benefit. Firstly, through additional barrels to the market over the coming six months, and a likely refill in due course. Further, we don't think it's unreasonable to expect Saudi and the UAE-led OPEC response to high oil prices at some point, maybe in the second half of this year. As we all know, ship owners make a living by transporting supply, hence the danger of talking our own book and stating the obvious, more supply would be most welcomed. The sanctions and ensuing trade disruptions coming out of the Russia-Ukraine conflict seems to be increasing transportation distances, so far most visible to ships smaller than the LCCs. If freight differentials become too wide, freight tend to flow up and down between the different ship sizes. We saw some of this at the outset of the conflict, and should regular trades see these differentials come back, the theory that the tide lifts all boats could hold true. The pop in freight rates for VLCCs that we saw a few weeks back is a good indicator that the underlying balance is not as bad as the current rates are indicating. Keep in mind that VCCs typically transport almost 45% of all seaborne crude oil volumes, but closer to 60% on a ton-mile basis. This is truly the workhorse of the oil industry. The trade disruptions are changing sourcing of refined oil products, elevating freight rates for product anchors. As this happens at a time of low inventories of both crude oil and refined products, It begs the question whether product tankers are front-running crew tankers, suggesting demand for feedstock and thus crude oil transportation to come next. There are currently too many ships in the market. The world fleet is, however, getting older by the day in combination with no ordering of new ships. The VLCC order book consists now of 54 ships to be delivered through the remainder of this year and next. This equals a meager 6.3% of the existing fleet, very low by any reference. With very limited scrapping, the current number of ships older than 20 years has now become significant. This part of the fleet could grow close to 100 ships by the end of the year, assuming no scrapping. We find it discouraging those older ships are not retiring from the fleet, in particular with very healthy demolition prices being offered. Until not long ago, there were hardly any commercial prospects for ships older than 20 years. But sadly, it is only sanctioned trades that keep all these older ships currently in business. These sanctions have simply developed new trades for ships that do not comply with rules and regulations. We do think, however, that something's got to give, as dry docks and other capital expenditure eventually will force the older ships out of the market. So in sum, All this would lead us to envisage the fleet to potentially shrink at the time when demand for transportation is expected to recover, creating a very rewarding freight environment. It would be a very bold move to bet against large tankers. And with that, we open up for Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, Press the hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Chappell from Evercore ISI. Please ask your question.