DHT Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2023 DHT Holdings Inc. Earns 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lila Halforsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' second quarter 2023 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 August 16th. 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 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. DHT continues to show a solid balance sheet represented by low leverage and significant liquidity. At quarter end, financial leverage was about 18% based on market values for the ships, and net debt was just above $11 million per vessel. The quarter ended with total liquidity of $359 million, consisting of $131 million in cash and $228 million available under our revolving credit facilities. Now over to the P&L highlights. It was a strong quarter with robust spot rates for the VLCCs and we achieved revenues on TCE basis of 113 million and EBITDA of 90 million. Net income came in at 57 million equal to 35 cents per share. Reported vessel operating expenses for the quarter was 19.7 million and G&A was 4.5 million. Included in the OPEX number for the quarter were some advanced costs for spares and consumables associated with ships that have been in yard in connection to some non-recurring items. The vessels in the spot market earned $64,800 per day, and the vessels on time charters made $36,200 per day. The weighted average TCE achieved for the quarter was $56,300 per day. Earnings were impacted by 61 scheduled off-fire days in connection with installation of exhaust gas cleaning systems for three vessels, and unscheduled off-fire, mainly related to the repair of one vessel. On this slide, we present the cash flow highlights. We started the second quarter with 117.5 million in cash, and we generated 90 million in EBITDA. Ordinary debt repayment and cash interest amounted to 13.6 million, and 38 million was allocated to shareholders through the cash dividend pertaining to the first quarter of 2023. In addition to the cash dividend, we also allocated 9 million to shareholders through share buybacks during the quarter. 20 million was invested in our fleet with 1.8 million in maintenance capex, 8.6 million for installation of exhaust gas cleaning systems, and 9.5 million through a deposit for the acquired vessel. The quarter ended with 130.6 million in cash. Switching to capital allocation. In line with our dividend policy to pay out 100% of net income to our shareholders, we will pay 35 cents per share as a quarterly cash dividend. The dividend will be payable on August 30th to shareholders of record as of August 23rd. This marks the 54th consecutive quarterly cash dividend, and the shares will trade ex-dividend from August 22nd. In addition to the cash dividend, we repurchased 1.1 million of the company's shares during the quarter for a total consideration of 8.9 million. The average price for the shares is $8.25 per share, and DHT's policy is to retire the shares upon receipt. With that, I will turn the call over to Svein.

Thank you, Leila. We entered into agreement to acquire a 2018 built DLCC for 94.5 million. The vessel is of equal design, was built to a high specification, has a large deadweight capacity and is fitted in an exhaust gas cleaning system. This addition is expected to be accretive to our earnings and will further improve our fleet's efficiencies, including our AER and our EEOI. We took advantage of the dips in the freight market and completed our last retrofit projects for exhaust gas cleaning systems during the quarter. As such, all our ships are now fitted with these systems. Subsequently to the quarter, we put in place a 10B5 program to potentially acquire our own shares after quarter close, resulting in an additional 250,000 shares bought at 8.46 per share. We took delivery of the newly acquired vessel last week, now named DHT Appaloosa. She was financed with available liquidity, but we have received commitments for a new secured credit facility of 45 million, which we expect to draw during the third quarter. The new facility has a DHT-style structure, which includes a 20-year repayment profile and a six-year tenor. The facility will be priced at the SOFR plus a margin of 180 basis points. Here with a brief fleet update. The DHT Appaloosa was delivered last week and is currently in dry dock for our first special survey. We have four time charter contracts that either have ended or are due to end this quarter. The DHT Mustang and the DHT Stallion have both been delivered back to us. The DHT Colt is scheduled to return home later this quarter, and the DHT Amazon contract will expire end Q3, early Q4. Following this, we will have four of our vessels on time charters and 20 ships on the dance floor in what we expect to be a rewarding freight market. During this quarter, we will dry dock four vessels. three of which have been brought forward from the scheduled survey dates in the fourth quarter. In our view, we are taking advantage of the current freight market to position these vessels for what we think is ahead of us, with the result of having no dry docks planned for the fourth quarter. We will now go through the third quarter outlook. We expect 530 days to be covered by our term contracts, at an average rate of 35,400 per day. We expect to have 1,560 spot days for the quarter, of which about 1,090 days equal to about 70% have been booked at an average rate of 46,300 per day. As of today, this suggests combined bookings of 78% of the total days for the quarter at weighted average earnings of 42,800 per day. You can compare these spot booking numbers with our estimated spot P&L breakeven of 25,700 per day for the third quarter, allowing you to model a net income contribution based on your own assumptions for the unfixed spot days. The market thus far this quarter exceeds the general idea of what a weak third quarter period should look like. On the graph to your left, you see that this year's recent and current dips are higher than the seasonal lows over the past five-year period. This is in addition to increased transportation distances driven by seaborne crude volumes being in the upper band of the five-year historical range, as illustrated in the graph to the right. To us, this suggests that the market is in the range between balanced and tight and easily triggered for upward movements in freight rates. The current market is a bit lower than the start of the quarter and now mostly moving sideways. An eco-vessel fitted with an exhaust gas cleaning system is currently worth about $30,000 plus for a round voyage in the east and about $40,000 per day out of the US Gulf.