DHT Holdings, Inc.

good day and thank you for standing by welcome to the q4 2023 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'll need to press star one and one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question please press star one and one again Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Leila Halvorsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' fourth quarter 2023 earnings call. I'm joined by DHT's President and CEO, Ryan Moxnes-Harfield. 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 on our website dhtankers.com until February 14th. 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. We maintain a very strong balance sheet represented by low leverage and significant liquidity. At year end, financial leverage was below 20% based on market values for the ships, and net debt was below 15 million per vessel. The fourth quarter ended with total liquidity of $268 million, consisting of $75 million in cash and $193 million available under our revolving credit facilities. Now over to the P&L highlights for the quarter. We achieved revenues on TCE basis of $94.5 million and EBITDA of $73 million. Net income came in at 35.3 million, equal to 22 cents per share. We continue to show good cost and control, and operating expenses for the quarter were 18.7 million, and G&A was 4 million. The vessels in the spot market earned $43,600 per day, and the vessels on time charters made $39,600 per day. and this includes profit sharing for two of the five vessels on time charters. The average TC achieved for the quarter was $42,800 per day. 2023 was the second best year in the company's history with net income of $161.4 million, equal to $0.99 per share. We achieved revenues on TC basis of $390 million, and EBITDA of $302 million. Average TCE for 2023 was $47,500 per day, where the vessels in the spot market earned $51,200 per day, and the vessels on time chargers made $36,400 per day. On this slide, we present the cash flow highlights. We started the fourth quarter with $74 million in cash, and we generated $73 million in EBITDA. Ordinary debt repayment and cash interest amounted to $16 million, and $30.6 million was allocated to shareholders through the cash dividend pertaining to the third quarter of 2023, while $2.2 million was used for maintenance gap tax. We prepaid all installments for 2024 under the Nordea credit facility amounting to 23.7 million and we drew down 24 million on RCS which was subsequently repaid in January 24. 23 million was related to changes in working capital and the quarter ended with 74.7 million in cash. Switching to capital allocation. In line with our dividend policy, we will pay 22 cents per share as a quarterly cash dividend, which is equal to 100% of ordinary net income. The dividend will be payable on February 28th to shareholders of record as of February 21st. This marks the 56th consecutive quarterly cash dividend, and the shares will trade ex-dividend from February 20th. Total cash dividend for the full year equals $0.99 per share, and below is an illustration of the quarterly cash dividends we have returned to shareholders since we updated the dividend policy in the second half of 2022. This amounts to a total of $1.41 per share. We have shown robust spot earnings during 2023, with quarterly average rates ranging from $43,600 up to $64,800 per day. Average spot earnings from Q4 2022 through Q4 2023 was $53,700 per day, which compares well with the average TD3C index for the same period. of $40,100 per day, or the 25-year average spot rate reported by Clarksons of $41,400 per day. Outlook for DHT spot rates for Q124 shows $55,900 per day booked to date. side of this slide, we present an update on estimated P&L and cash breakeven rates for 2024. P&L breakeven is estimated to $27,400 per day for the fleet, while cash breakeven is estimated to $18,500 per day, resulting in $8,900 per day per shift in discretionary cash flow after dividends. So assuming the vessels earn P&L breakeven, this means about 76 million in discretionary cash flow for the year. On the right side of the slide, we illustrate estimated earnings per share for 2024 based on different rate scenarios. Assuming $50,000 per day, earnings per share will be $1.04, while $75,000 per day estimates $1.85. And a spot rate of $100,000 per day estimates $2.65 in earnings per share. We will now go through the first quarter outlook. We expect 455 days to be covered by our time charter contracts at an average rate of $36,600 per day. This includes reported profit sharing for January and February for two of the five vessels on time charters, while March only assumes base rate. Further, we expect to have a total of 1,630 spot days for the quarter, of which 1,270 days equal to 78% have been booked at an average rate of $55,900 per day. As of today, this suggests combined bookings of 83% of the total days at an average rate of $50,800 per day. You can compare these spot booking numbers with the estimated spot P&L break-even rate of $25,900 per day for the first quarter, allowing you to model a net income contribution based on your own assumptions for the unfixed spot days. With that, I will turn the call over to Svein.

Thank you, Relaina. On this slide, we wanted to discuss the fleet development and its demographics. On the graph to the left, we illustrate with blue line the average historical age of the VCC fleet since 1996. As you will see, the average age in the 90s were about 13 years. As the double-hull concept evolved in response to the planned phase-out of single-hull tankers, the fleet reduced to about eight at the beginning of 2000. It further reduced to some seven years following the extensive deliveries between 2007 and 2012. Fleet renewal stagnated, however, despite the meaningful number of ships being delivered once the eco-designs came to the market in 2015. Today, the average age of the VCC fleet is 11.5 years. In stark contrast to this development, general fleet renewal has abated, resulting in the current order book standing at 2.5%. Looking at the graph to the right, it illustrates the anticipated fleet over the next three years. We assume no scrapping, as this has been non-existent in the recent past. If you look to end 2026, the fleet that will be older than 20 years will reach 200 ships, a big number. However, looking at how many ships will be older than 15 years of age by the end of 2026, the number is huge. We will in this scenario reach 445 vessels, equal to almost 50% of the fleet. On this slide, we continue the same theme. And apologies if this comes across as repetitive. The graph to the left points out how ordering on new VCCs more or less came to a halt in the first half of 2021. Three years later, we have seen some activity pick up, but the order book is, as we said, still only 2.5%. The graph to the right shows the number of ships scheduled for delivery over the coming five years against ships turning 20 or 25 years. For all practical purposes, 2026 delivery is now sold out. Shipyards are offering 2027 deliveries, however, in strong competition with other ship types, such as LNGs, LPGs, ammonia carriers, container carriers, and large boat carriers. Even a significant effort to contract new ships will struggle to put a dent in this highly constructive supply picture. The CII regime will likely result in part of the fleet having to slow down to stay in business, thereby reducing capacity further. There are likely numerous reasons why the order book has ended up where it is. We suggest uncertainty related to future fuels to be one. Further, many ship owners have alternative investment opportunities and not only in other sectors in shipping. We see many private companies with meaningful capital being allocated to family offices, private equity, and real estate. This slide presents research from well-regarded Rijstad Energy. It depicts the prospective uptake of either ammonia or methanol as fuel in different shipping sectors. These two fuels are likely not the only alternatives we will see in the future, but they seem to be the most talked about. Following a deep dive into this interesting issue, they have mapped out construction of potential future production facilities, the expected cost of these fuels, how and where these fuels can be delivered to the market, and lastly, are there any other industries or sectors than our own that have a willingness or ability to pay a higher price? Additional aspects include consideration of energy density and how that can be solved, here under bunker capacity on board ships, and whether that will result in redesigns that make ships larger or having to reduce carrying capacity. All are very complex pictures. These two graphs look out to 2014 and suggest tankers, hereby illustrated by the green lines, will have a slow uptake or changeover. You might see uptake in LNG as a transitionary fuel and biofuels being blended into conventional products, but current propulsion systems look set to have many more years in business. This slide is a familiar picture. Energy Aspects, another highly respected firm, has laid out the dislocation between where future crude oil supply will come from and where it will be consumed. No surprises here, but nevertheless interesting as the analysis has a detailed bottom-up approach. The key takeaway is, as we have stated many times over, the Atlantic is long crude oil and the demand growth is in Asia. This will be carried on ship. and the majority most likely on the industry workforce deals with these, currently carrying almost 50% of all seaborne crude oil. Within all the geopolitical noise, we should not forget to consider the fundamentals supporting our business. Continued growth in oil demand, longer transportation distances, and hardly any new shipping capacity coming to market against a rapidly aging fleet. We are staying focused on what is within our control, concentrating on disciplined execution of our strategy, maintaining what we have been told is a highly regarded level of corporate governance. We believe our company is well-structured for cyclical and volatile markets, with a solid balance sheet and a strong liquidity as its foundation. As always, we keep our eyes on maintaining robust cash break-even levels while still having meaningful market exposure and operating leverage, being as profitable as we can. Hold their bow with a defined and shareholder-friendly capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends. And with that, operator, over to you.