DHT Holdings, Inc.

Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' first quarter 2024 earnings call. I am joined by DHT's president and CEO, Svein Moxnes Harfjer. 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 22nd. In addition, our earnings press release will be available on our website and on the SEC EDGAR system as an exhibit to our form 6K. 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 SSC-Edgar system, including the risk factors in these reports, for more information regarding risks that we face. We will start the presentation with some financial highlights. We maintain a very strong balance sheet represented by low leverage and significant liquidity. At quarter end, financial leverage was 17.8% based on market values for the ship, and net debt was 13.5 million per vessel. The first quarter ended with total liquidity of 289 million, consisting of 73 million in cash and 260 million available under our evolving credit facilities. Now over to the P&L. We achieved revenues on TCE basis of 106.3 million and EBITDA of 83.7 million. Net income came in at 47.1 million, equal to 29 cents per share. We continue to show good cost control, and operating expenses for the quarter were 19.2 million, and G&A was 4.7 million. We are pleased with the result for the quarter, and the vessels in the spot market achieved robust earnings with $54,000 per day, and the vessels on time structures made 39,500 per day. The average DC achieved for the quarter was $50,900 per day. And then over to the cash flow highlights. We started the first quarter with $74.7 million in cash, and we generated $83.7 million in EBITDA. Ordinary repayment and cash interest amounted to $15 million, and $35.5 million was allocated to shareholders through a cash dividend while 3.9 million was used for maintenance capex. We prepaid 24 million on the ING revolving credit facility, while 7.2 million was related to changes in working capital, and the quarter ended with 73 million in cash. Switching to capital allocation. DHT has a defined and predictable capital allocation policy And in line with our policy, we will pay 29 cents per share as a quarterly cash dividend, which is equal to 100% of ordinary net income. The dividend will be payable on May 31st to shareholders of record as of May 24th. This marks the 57th consecutive quarterly cash dividend, and the shares will trade ex-dividend from May 23rd. On the left side of this slide, we present an update on estimated P&L and cash break-even rates for 2024. P&L break-even for the full year is estimated to $27,500 per day for the fleet, while cash break-even is estimated to $18,300 per day, resulting in $9,200 per day per shift in discretionary cash flow after dividends. So assuming the vessels earn P&L break even, this means about 79 million in discretionary cash flow for the year. On the right side of the slide, we illustrate the quarterly cash dividend we have returned to shareholders since we updated the dividend policy in the second half of 22. This amounts to a total of $1.70 per share. And with that, I will turn the call over to Svein.

Thank you, Laila. This slide compares DSC spot market performance over the last 12 months with the quoted TD3C index. The TD3C index is the most prominent index representing the largest VLCC trade, namely loading in Saudi Arabia and discharging in China. The green lines and the numeric ledgers illustrate our spot earnings for each quarter in the period, and the orange lines show the index earnings. Several reports refer to the index when assessing the DHC market. As one could clearly see from these numbers, the index is not an appropriate reference for DHC's spot earnings. The earnings powers of the SHIB used in the index calculation is inferior to our average vessel. but this does not represent the whole delta. The other part reflects our customer base and related trading patterns and what we actually get out of the market. The average delta during this period is about $15,000 a day. On this slide, we have an additional reference to DHT producing competitive spot earnings, and that is when compared to peers. The peer group consists of the usual suspects listed in the US, all with similar trading policies with respect to geographical areas and origin of oil. One of the four in the peer group is yet to report for the first quarter of this year. We illustrate quarterly spot earnings for each peer over the same period as the previous slide, and the numbers speak for themselves, with DST coming out on top. And now to the outlook for the second quarter. As per usual, we provided our business updates on 10 days into the current quarter. The spot market softened a bit following our update, but is now on a strengthening path again. Of the total estimated spot days for the second quarter, we have booked 72% at $51,000 per day. You should see this number in relation to the spot P&L breakeven for the second quarter being estimated at about $25,300 per day. As stated in the report, the freight market continues to show steady and reassuring conduct. The slumps in the market are grinding higher, with recent lows leveling out above $40,000 a day for an ecovessel fitted with exhaust gas cleaning systems. We assess the current stock market for the three main routes on average to be in the mid to high 50s for DHT's average type weighted fleet. US Gulf to the Far East is currently a tad behind Arabian Gulf, South America and West Africa, but is likely on the rise. The North Sea to Asia has been absent for close to two years, but is now back in the market with a couple of cargoes per month. We understand that VLCs are gaining market share, now about 50% of seaborne crude oil transportation, underscoring end-users' increasing focus on cost per unit transported. This is in particular for the long-haul trades, but is also now a result of the Red Sea challenges, with parts of the AGE to Mediterranean trade having moved from Suez Maxis to VLCs, sailing around Cape of Good Hope. There is limited time charter activity for periods in excess of one year. However, we currently estimate the three-year time charter market for a good ship to be in the mid $50,000 per day. And there is one client in the market now asking for bids on this, and there is a field of owners offering on this, although higher than our estimated number of markets. And in sum, we are increasingly confident about what is ahead of us. The discussion of fleet development and demographics might be repetitive. We have here a presentation of the development with a somewhat different illustration. We have applied some key market observations and assumptions. Over 90% of the ships now older than 20 years of age are engaged in the shadow markets. This fleet's productivity is estimated to be some 50% of its nominal capacity. This is largely due to these ships rarely calling ports, but often doing transshipments of cargoes involving numerous ships and hence delaying the delivery of cargo. And three, we assume ships will disappear from the shadow trade when they reach 25 years of age. As we have stated on numerous occasions, we expect the fleet to shrink over the coming years. The blue bars represent the fleet that has been or is below 20 years of age. This part of the fleet is employed in the compliant markets and its sites probably peaked in 2021 with some 768 ships. When applying our observations and assumptions, We estimate the sub-20 year old fleet to shrink to less than 730 ships by the end of 2027. As most of you well know, this happens at the time of growing oil demand and expanding transportation distances. The ships in the shadow freight are serving a purpose in a market, but with a significant haircut in its productivity. We also take note that following the recent contracting of EELS disease, the activity has receded with apparently limited interest from ship owners in contracting large tankers now. We are being told that interest is being directed to other ship types and classes. The VCC order book now stands at some 5% of the sailing fleet, supporting our constructive market view. On that note, we will discuss our new building project. As announced, we have contracted four VCCs, all for delivery in 2026. They are contracted at what we deem to be the top quality shipyards for large tankers. The ships will be of super eco designs, implying premium earnings power and related reduced emissions. These ships will have a new engine model that is different from what is being adapted to most of the other new building orders that have been reported over the past few months. Further, our new building orders are of larger carrying capacity, both in deadweight and cubic terms, again when compared to most of the other orders that have been placed. This is expected to offer better economics for both customers and DHT. For sake of clarity, we have no plan to declare the options for the additional vessels. Our next priority would be second-hand acquisitions, we'd be able to identify opportunities attractive to DHT. As stated, we do not intend to issue any new capital in relation to this new building project, and our financing plan consists of cash flow from operations, available liquidity, and new mortgage debt. With respect to new mortgage debt, our base case assumes about $60 million per vessel with a DHT-style financing structure. And importantly, the project and our strategy assume that the dividend policy with 100% of ordinary net income shall remain in place. This last slide is familiar, so we will round off by saying that our markets are robust, providing good support, and are steadily, albeit gradually, improving. Our team is doing a great job in getting the most out of what the markets have to offer, delivering premium earnings for our ships. Contracting on new ships seems to have receded and supporting the highly constructive supply outlook. And we'll stick to our knitting with a focus on first rate operations and related financial results in anticipation of increasingly rewarding times ahead. And with that, operator, over to you.

Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Frodo Morkadal from Clarkson Securities. Please go ahead. Your line is open.