DHT Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q3 2024 DHC Holdings Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will 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 would now like to hand the conference over to your first speaker today, CFO Leila Halforsen. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' third quarter 2024 earnings call. I'm joined by DHT's president and CEO, Svein Moxnes-Halfe. 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 November 20th. In addition, our earnings press release will be available on our website and on the SSC 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 EdCore system, including the risk factors in these reports for more information regarding risks that we face. As usual, we will start the presentation with some financial highlights. Our balance sheet remains in excellent health with low leverage and significant liquidity. At quarter end, financial leverage was 17.6% based on market values for the ships and net debt was 13.9 million per vessel well below estimated residual SHIP values. The third quarter ended with total liquidity of 264 million, consisting of 74 million in cash and 190 million available under our revolving credit facilities. Now over to the P&L. We are pleased with the result for the quarter. We achieved revenues on TCE basis of 92.6 million and EBITDA of 70.4 million. Net income came in at 35.2 million equal to 22 cents per share. Vessel operating expenses for the quarter were 19 million and G&A for the quarter was 4.2 million. For the third quarter, the average TCE for all vessels in the spot market was $43,700 per day, while the spot vessels under 15 years of age achieved earnings of $47,600 per day. The vessels on time charters made $38,800 per day, while the average combined TCE achieved for the quarter was $42,400 per day. Net income for the first nine months of 2024 was 126.7 million, equal to 78 cents per share. For the first nine months, our spot vessels achieved $50,100 per day, while the average combined TCE came in at $47,400 per day. The spot vessels under 15 years of age achieved earnings of $52,800 per day for the first nine months. And then over to the cash flow. The cash flow for the third quarter of 2024 was stable, and we started the quarter with $73 million in cash. We generated $70 million in EBITDA. Ordinary debt repayment and cash interest amounted to $15 million, and $43.6 million was allocated to shareholders through cash dividend, while $2 million was used for maintenance capex. We paid second installments for two of the new buildings amounting to 25.8 million, while 15.3 million was related to positive changes in working capital and the quarter ended with 74 million in cash. Switching to capital allocation, DHT has a well-defined capital allocation policy and in line with our policy we will pay 22 cents per share as a quarterly cash dividend equal to 100% of ordinary net income. The dividend will be payable on November 29th to shareholders of record as of November 22nd. This marks the 59th consecutive quarterly cash dividend and the shares will trade ex-dividend from November 22nd. On the left side of this slide, we present an update on estimated P&L and cash break-even rates for 2025. P&L break-even for the full year is estimated to $26,500 per day for the fleet, while the cash break-even is estimated to $20,000 per day, with a projected $6,500 per day per ship in discretionary cash flow after dividends. So assuming the vessels earn P&L break even, this means about 56.5 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 $2.19 per share. And with that, I will turn the call over to Fine.

Thank you, Laila. Following up on Laila's capital allocation slide, we here present an overview on how our balance sheet has developed over the past 10 years in combination with accumulated quarterly cash dividends we have paid for the same period. Importantly, the company has also invested in its fleet in this period, including new buildings, second-hand acquisitions, and an exhaust gas cleaning system program for the entire fleet. Save for the Ships for Shares transaction in 2017, when we acquired BW's VLCC fleet, which proved to be an excellent investment, we have not issued equity in the market since the fall of 2014. The leverage level is illustrated by the yellow line and measured in percentage of book values. It was 48% at the start of this period and went up to the mid-50s in 2018, following the mentioned fleet expansion in 2017. The generous freight market in 2020 enabled us to reduce the debt level by about half to some 28%. The green bars present the accumulated quarterly cash dividends for each year in which the quarterly cash dividend was paid. Again, you will note that 2020 was a generous year with substantial profits resulting in significant dividends. Stating the obvious, we paid out significant dividends and invested in the balance sheet at the same time. Over the 10-year period, we have paid out a total of $750 million in quarterly cash dividends. The last two periods, 2023 and 2024 year-to-date, illustrates how the present capital allocation policy implemented during the fall of 2022, with 100% of ordinary net income being paid in quarterly cash dividends, has played out. Here with the updated bookings to date for the fourth quarter for the company. We expect to have 596 time-charted days covered for the fourth quarter at $40,000 per day. This rate assumes the base rate and profit sharing for October and November for the two time starter contracts that have this feature, and the base rates only for December. We assume 1,610 spot days in this quarter, of which 64% have been booked at an average rate of $41,000 per day. Our ships that are younger than 15 years of age have been booked at $44,800 per day. You will note that we have improved the rates on the bookings when compared to our business update on October 9, an excellent effort from the DST team given the general market softened during this period. The spot P&L breakeven for the quarter is estimated at 21,500 per day, a number that should assist in estimating the net income contribution from our spot fleet. Then some market commentary. Everyone is, of course, waiting for the seasonal upturn. We note that during the last two years, the first quarter offered the highest rates. Chinese economic growth and oil demand have year-to-date not met projections. Whilst China is deploying various inducements to its economy, we are yet to see whatever it takes levels of economic policy changes and stimulus. The stimulus announced last week focused on resolving debt levels. It did not address a needed boost to consumption. Chinese officials indicated that the next step would be significant and endeavored to, amongst others, address lackluster consumption. It has been suggested that China will, to some extent, seek to tailor the next step in response to anticipated policies to be implemented by the incoming Trump administration. As the world's second largest economy, we do think it's reasonable to expect efforts from China which should revitalize the economy and lead to increased consumption, including an uptick in oil demand. The result of the U.S. election leads us to expect certain policy changes that we think will be constructive for our business. Tightening of Iranian sanctions that should reimpose pressure on Iranian oil exports, barrels that could be replaced by other Middle Eastern producers. Should this play out, the transportation work would shift from the shadow fleet to the compliant fleet. Reversal of current decarbonization regulations implying higher medium-term demand for fossil fuels in general towards 2030. And, pro-drilling policies should further stimulate US production growth and exports. By restraining production, OPEC Plus aims to balance the market and support prices. especially in the face of increasing competition from Atlantic Basin producers. This strategy also includes targeting Asian customers' inventory levels of crude oil below the five-year average, creating a tighter market for when economic conditions improve. However, limited transparency in China's crude oil inventory data complicates assessment of actual levels. If Chinese inventories are indeed low as indicated and as Western inventories are relatively higher than in Asia, one should expect Atlantic based barrels to increasingly go East. Additionally, recovering refinery margins in Asia in combination with increasing Chinese crude oil import quotas heading into next year should shift the dynamics in favor of a stronger freight market. Based on positive feedback and encouragement from our key stakeholders, namely shareholders, customers, and lending banks, we believe we have an appropriate strategy tailored to the structure of our markets, focusing on solid customer relations, offering safe and reliable services, maintaining a competitive cost structure with robust cash break-even levels, a solid balance sheet, and a clear capital allocation policy. The whole DHC team appreciates the encouragement and continues to work hard and operate with leading governance standards and a high level of integrity. And with that, operator, I turn it over to you.