DHT Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q3 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 and 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, Leila Halvorsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' third quarter 2022 earnings call. I am joined by DHT's President and CEO, Svein Moxnes-Hartfiak. 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 November 15. In addition, our earnings press release will be available on our website and on the SSE Ego 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 SSC-Edgar system, including the risk factors in these reports for more information regarding risks that we face. The company continues to show very strong and healthy balance sheet and the quarter ended with 65.7 million of cash. In addition, at quarter end, the company's availability under both revolving credit facilities was $235 million, putting total liquidity at $301 million as of September 30th. Financial leverage is about 22.6% based on market values for the shifts, and net debt per vessel was $15.4 million at quarter end, which is significantly below current scrap values. Looking at the P&L highlights, EBITDA for the third quarter was $35.6 million, and net income came in at $7.5 million, equal to $0.04 per share. The results include a gain related to sale of vessel of $6.8 million, and a non-cash gain in fair value related to interest rate derivatives of $2.8 million. The company continues with good cost control with OPEX for the quarter at $17.6 million and GNA for the quarter at $3.9 million. In the third quarter, the company achieved an average TCE of $24,400 per day with the vessels on time shutter earning $35,300 per day and the vessels in the spot market making $22,000 per day. On the next slide, we present the cash bridge for the quarter. We started the quarter with 105.8 million of cash, and we generated 35.6 million in EBITDA. Ordinary debt repayment and cash interest amounted to 7 million, while 15.3 million was allocated to shareholders through dividend payments and share buybacks. $2.3 million was used for maintenance capex, while change in working capital amounted to $24.1 million, mainly related to the change in accounts receivable and accrued revenues due to increased freight rates. Net proceeds from sailor vessels were $24.8 million, while $50 million was used to prepay long-term debts, and the quarter ended with $65.7 million of cash. In August, we sold the 2008-built DHT Edelweiss for $37 million, and the sale generated a gain of $6.8 million. In connection with the sale, we repaid outstanding debt of $12.2 million. The vessel was delivered during the third quarter with net proceeds of $24.8 million. The vessel was not fitted with an exhaust gas cleaning system, and is due for its third survey and the installation of ballast water treatment system in the first quarter of 2023. Following the sale, the average age of our fleet has been reduced and our AER and EEOI metrics improved. In September, we prepaid $50 million under the Nordea credit facility. The voluntary prepayment was made under the revolving credit facility tranche and may be reborrowed. Also, in September, we entered into a five-year time charter contract for DHD PUMA or substitute at $38,000 per day. Charters have the option to extend two additional years at $41,000 and $45,000 per day, respectively. The vessel is expected to deliver into the contract after the exhaust gas cleaning system installation in Q123. Switching now to capital allocation. In September, the company announced a new dividend policy with 100% of net income being returned to shareholders in the form of quarterly dividends. The policy was implemented from the third quarter of 22, and the company will pay a dividend of $0.04 per share for the quarter. It will be payable on November 29 to shareholders of record as of November 22. This marks the 51st consecutive quarterly cash dividend. During the quarter, the company purchased 1.5 million of its own shares for an aggregate consideration of 8.8 million at an average price of $5.87. All shares were retired upon receipt, and the company currently has 162.7 million outstanding shares. So for the quarter, the company is therefore returning 15.3 million to shareholders, 6.5 million in dividends, and 8.8 million in share buybacks. With that, I will turn the call over to Svein.

Thank you, Laila. On this page, we're showing a new table with a purpose to provide better guidance with respect to the quarter succeeding the one we are reporting on. So for the fourth quarter of this year, we have a time chart to book at an average rate of 34,800 per day, covering some 510 days, roughly a quarter of the period as a whole. As of today, we have booked 69% of our 1,540 available spot days at $61,800 per day. Further, we are providing the estimated spot P&L breakeven for the period allowing you to model the TC income based on your own assumptions for the unfixed spot days. We can tell you this much. As of today, the rates we are seeing for the balance of the quarter are substantially higher than what has been secured on average so far. We think this piece of information that we will continue to include in our releases going forward to make good sense in relation to our new dividend policy of 100% of net income to be paid at quarterly cash dividends. As announced earlier this year, we have embarked on a project to retrofit eight eco-ships with exhaust gas cleaning systems, taking our fleet with these installations to 100%. The current spreads between VLSFO and HFO are attractive, offering payback on the retrofit investments inside the year. The first vessel will be retrofitted towards the end of the year, being a vessel that will enter into a long-term time charter upon completion of the installation. Following this, we will retrofit the DHT Colt and the DHT Stallion during the first quarter of 2023. Both vessels have natural dry docks, hence no commercial off-fire will be taken. For the balance of the project, we are adopting a pragmatic and dynamic schedule based on the vessel's whereabouts, and their commercial opportunities. A further update will be provided on the next earnings poll. We are now in a favorable business environment with rewarding economics for most participants. We have a robust oil price, we have healthy refining margins and we have a strong freight market. Companies are in general profitable and in all its simplicity people want to do business. Certainly fun and rewarding times matched by a promising outlook. Because of the conflict between Russia and Ukraine, oil trading is encountering disruptions for many routes. These trade disruptions result in increased transportation distances, which reduces the productivity of the tanker fleet, pushing rates beyond what already supporting dynamics would have done. As you will see from this slide, transportation distances for European imports could be upwards to 7 to 11 times that of imports from the Baltic region. And for Russian exports to Asia, one can see distances upwards to the same multiple of 7 to 11 times when compared to Northwest Europe. Some trades will attract additional vessels into the shadow fleets on top of those trading sanctioned barrels from Venezuela and Iran. This activity has held all the ships away from scrapping despite healthy scrap prices. As ships that enter these murky trades are unlikely to return to the compliant market, one could look at this development as in due course being the new scrapping. As we have suggested before, there is an increasing probability of the tank fleet to decrease at a time when order books are low and shipyards are essentially full for the coming couple of three years. So in sum, you should expect us to continue with a disciplined execution of our business model and strategy. We are well structured for cyclical markets, amongst others supported by a strong balance sheet and healthy liquidity. The freight market has most certainly recovered with strong freight rates and a promising outlook. We are tuned for this recovery with increasing spot exposure into an environment in which we are set to make significant profits. We have a solid track record in allocating capital. Based on our new dividend policy with 100% of net income to be distributed as quarterly dividends, we have every intention on showing you the money. And with that, we open up for questions. Operator?