DHT Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2022 DHT Holdings Inc. Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laila Halvorsen. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHD Holding's second quarter 2022 running school. I'm joined by DHD'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 August 18th. In addition, our earnings press release will be available on our website and on the SSE 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 report 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 continued to show a very strong and healthy balance sheet and the quarter ended with 106 million of cash. At quarter end, the company's availability under both revolving credit facilities was 188 million. putting total liquidity at 294 million as of June 30th. Financial leverage is about 28% based on market values for the ships, and net debt per vessel was 15.7 million at quarter end, which is well below current scrap values. Looking at the P&L highlights, EBITDA for the second quarter was 32.5 million, and net income came in at 10 million equal to six cents per share. The results include the gain related to sale of vessels and a non-cash gain in fair value related to interest rate derivatives. The company continues with a good cost control with offbacks for the quarter at 18 million equal to $7,800 per day and G&A for the quarter at $4.2 million. In the second quarter, the company achieved an average TCE of $24,300 per day, with the vessels on time charter earning $33,800 per day, and the vessels in the spot market earning $21,200 per day. For the third quarter, 68% of the available days have been booked at an average rate of $23,600 per day, and 58% of available spot days have been booked at an average rate of $18,400 per day. We sold two vessels during the quarter, DHT Hawk and DHT Falcon for 40 and 38 million respectively. The sales generated a combined gain of $12.7 million. In connection with the sales, we repaid outstanding debt on the two vessels of $13.3 million. Both vessels were delivered during the second quarter, and net proceeds amounted to $62.9 million. Following these sales, the average age of our fleet has been reduced and our AER and EEOI metrics improved. Part of the net proceeds were used to reduce debt. In June, we prepaid 23.1 million under the Nordea credit facility. The voluntary prepayment was made under the revolving credit facility tranche and may be reborrowed. On the next slide, we present the cash bridge for the quarter. We started the quarter with $58.6 million of cash and we generated $32.5 million in EBITDA. Ordinary debt repayment and cash interest amounted to $9.1 million, while $19.2 million was allocated to shareholders through share buybacks and dividend payment. $4.5 million was used for maintenance capex, while net proceeds from sale of vessels amounted to $62.9 million. 23.1 million was, as mentioned on the previous slide, used to prepay long-term debt. 8.3 million was the initial cash recognition from Goodwood. And we ended the quarter with 105.8 million of cash. Switching now to capital allocation. During the second quarter, the company purchased 2.8 million of its own shares equal to 1.7% of the outstanding number of shares as of March 31st, for an aggregate consideration of 15.9 million. In addition, the company will pay a dividend of 4 cents per share for the quarter. It will be payable on August 30th to shareholders of record as of August 23rd. This marks the 50th consecutive quarterly cash dividend. With that, I will turn the call over to Svein.

Thank you, Laila. Following the share repurchases conducted during the second quarter as discussed by Laila, we continue to buy back stock after quarter end under the 10b51 rule. We have third quarter to date acquired some 1.5 million shares at an aggregate cost of 8.8 million at an average price of $5.87 per share. Considering buybacks conducted in 2021 and buybacks made year to date, we have in total bought back close to 10 million shares, equaling some 6% of the company's capital. With a total consideration of 57 million, the average price of these repurchases is $5.77 per share. We consider this to be a great and an accretive investment, and all shares have been retired upon receipt. During the quarter, we agreed to refinance the bilateral credit facility for the DHT Tiger with the existing lender, Credit Agricole. The structure is in line with the DHT-style financing. 37.5 million made up of 2.5 million per year of the remaining life of the ship. It has six years tenor and a 20-year repayment profile. The pricing represents a new low for DHT's borrowing costs at the secured overnight financing rate, also referred to as SOFR, plus a margin of 2.05%. It includes a historical credit adjustment spread of 26 bps between SOFR and LIBOR. As this is a new structure that will replace LIBOR, you should note for reference that this pricing is equal to a LIBOR plus a margin of 179 bps. We typically have a mix of spot and fixed employment for our fleet. However, it is not formulaic with a percentage of the fleet employed one way or another, but the focus on the nominal rates and tenors that in our view will contribute meaningfully to the business. We have entered into a five-year time charter for the DST Osprey at 37,000 per day. Delivery is planned for August, and the customer has options to extend for an additional two years at 40,000 and 45,000 per day, respectively. The key attraction to this time charter is the tenor, as we would not find this rate attractive for a two- or three-year charter. We see an increased level of inquiries for time charters, and will selectively engage with our customers if and when meaningful business can be conducted. We have committed 25 million to retrofit and additional aid ships with scrubbers. The combination of decreased scrubber costs, early delivery of equipment, and continued elevated spreads between heavy fuel oil and very low sulfur fuel oil makes this a compelling investment in our view. Considering the current average spreads into Jira and Singapore, the payback on these investments should be inside a year. The work will commence in the fourth quarter and we expect completion during the first quarter of next year. We plan to take each ship out of service for 30 days, give or take. This is a highly efficient schedule that will be executed by our experienced team at one of our go-to shipyards. Upon completion, we will have a total of 23 VCCs fitted with scrubbers, with these additions expected to boost earnings for the company. So, to sum it all up, we continue to stay disciplined, focusing on execution of our business model and strategy. This includes key building blocks in delivering value for our shareholders. We are well structured for cyclical markets, with probably the strongest balance sheet amongst the peer group. Ample liquidity enabling us to invest in the business and act on opportunities should they arise. All with robust downside protection without having given away the upside. The tanking market recovery has started and we are tuned for this recovery through our actions and structure to create value. This includes a reduced number of outstanding shares through buybacks, and an expanded and fast-tracked scrubber program that will boost earnings. We have substantial operating leverage in the business, combined with a significant capital distribution potential. And with that, we open up for questions. Operator?