DHT Holdings, Inc.

Good morning and good afternoon everyone. Welcome and thank you for joining DHT Holdings fourth quarter 2024 earnings call. I am joined by DHT's president and CEO, Zmayn Moksmaez Halafjel. 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 13th. In addition, our earnings press release will be available on our website and on the SSD anchor system as an exhibit to our Form 6K. As a reminder, on this conference call, we'll also be discussing the risk factors in the report. We also will be discussing the risk cost 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 SSD anchor 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. We continue to show a very strong balance sheet with low leverage and significant liquidity. The fourth quarter ended with total liquidity of $258 million, consisting of $78 million in cash and $180 million available under our revolving credit facilities. At quarter end, financial leverage was 18% based on market values for the ship, and net debt was $13.8 million per vessel, well below estimated residual ship values. Now over to the P&L. We achieved revenues on TCE basis of $85.5 million and EBITL of $60.6 million for the fourth quarter. Net income came in at $54.7 million, equal to $0.34 per share. After adjusting for a non-cash reversal of prior impairment charges of $27.9 million, net income came in at $26.8 million, equal to $0.17 per share. Vessel operating expenses for the quarter were $20 million, and G&A for the quarter was $5.6 million, of which the latter included a non-recurring item of $0.7 million. For the fourth quarter, the average TCE for all the vessels in the spot market was $38,200 per day, while the spot vessels under 15 years of age achieved earnings of $40,500 per day. The vessels on Time Starter also made $40,500 per day, while the average combined TCE achieved for the quarter was $38,800 per day. Net income for the full year of 2024 was $181.5 million, equal to $1.12 per share. Adjusted for the non-cash reversal of prior impairment charges booked in the fourth quarter of $27.9 million, net income for 2024 came in at $153.6 million, equal to $0.95 per share. Yet another strong year for DHT. Vessel operating expenses for 2024 were $78.6 million, which includes a non-recurring insurance deductible, and G&A for 2024 was $18.9 million. We estimate G&A for 2025 to be about $18 million, equal to an average quarterly run rate of $4.5 million. Depreciation for 2024 was $111.9 million, and based on our current fleet, we estimate our annual depreciation for 2024 to be about $110 million. For 2024, our spot vessels achieved $47,200 per day, while the average combined TCE came in at $45,200 per day. The spot vessels under 15 years of age achieved earnings of $49,800 per day for the full year of 2024. On this slide, we present the cash flow highlights for the fourth quarter. We started the quarter with $74 million in cash, and we generated $60.6 million in average. Ordinary debt repayments and cash interest amounted to $15.1 million, $35.5 million was allocated to shareholders through a cash dividend, and $13.2 million was used for share buybacks. $12.9 million was used for our new building program, while $10 million was drawn under our RCF. Positive changes in working capital amounted to $9.3 million, and the quarter ended with $78 million in cash. And with that, I will turn the call over to Svart.

Thank you, Lina. We'll talk about our business update. So during December, we took advantage of the soft period in the capital markets to repurchase our own shares to the tune of $1.5 million shares, just shy of 1% of the company. The average price was $8.89, almost $3 lower than yesterday's closing price, and a creative earnings per share and net asset value by a good margin. We entered into agreement to sell our oldest ship, the DHT Scandinavia, built in 2006 for a price of $43.4 million. The vessel was debt free, and we expect the sale to generate a book gain of about $19.8 million. The cash proceeds will be allocated to general corporate purposes here under investments in vessels, share buybacks, and prepayment for debts. The vessel was delivered to our new owners during January. During the quarter, we paid $12.8 million in installments under our new building program, taking total installments during 2024 to $90.1 million. Subsequent to the quarter, we secured a one-year time charter for DHT China, built 2007, at $40,000 per day. The contract commenced towards the end of January. On this slide, we will discuss capital allocation and dividends specifically. The dividend for the fourth quarter of 2024 is declared at $0.17 per share. This is as per our capital allocation policy on paying out 100% of ordinary net income as quarterly cash dividends and marks our 60th consecutive quarterly cash dividend. The shares will trade ex-dividend on February 18, and the dividend will be paid on February 25. In the graph to the left, we update our estimated P&L and cash breakeven levels for 2025. As you will see, the difference between the two is estimated at $7,000 per day for the year. This discretionary cash flow will remain in the company and be allocated to general corporate purposes, with the intention being to fund installments under our new building program. The graph on the right illustrates the accumulated dividends since updating our capital allocation policy from the third quarter of 2022. The accumulated amount is $2.36 per share and reflects well during a period in which our share price has appreciated, and we made share buybacks totaling $32 million, equal to .3% of the company. We will now discuss the bookings to date for the first quarter of 2025. We expect to have 604 timeshutter days covered for the first quarter at $41,700 per day, a marginal improvement when compared to the prior quarter. This rate assumes only the base rate for February and March for the timeshutter contract that has profit sharing feature. We assume 1,475 spot days in the quarter, of which 74% have been booked at an average rate of $36,400. Our ships that are younger than 15 years of age have been booked at $37,100 per day. You will note that we have improved the rates on the bookings when compared to our business update of January 5. The current spot market for modern vessels with exhaust gas cleaners has been $55,000 to $60,000 per day. The spot P&L breakeven for the quarter is estimated to be $21,700 per day, a number you might use to estimate the net income contribution from our spot fleet for the first quarter. We believe our market is increasingly becoming a highly constructive supply story. Here we illustrate the demographics of the VLC fleet. Maybe not news to many of you, but nevertheless, we think it's important to reinforce the obvious, which is that the VLC fleet is set to shrink, and at a time when demand for our services is growing. By the end of 2026, we estimate 444 VLCs to be older than 15 years of age. At the same point in time, 202 are estimated to be older than 20 years, and 184 to be older than 25 years. These are staggering numbers, and will increasingly support our business. In the same context, we estimate almost 200 VLCs to belong to the so-called shadow fleet. Following the recent additional sanctions, 97 VLCs are now sanctioned, making it harder for these vessels to operate and serve a purpose. For avoidance of doubt, these vessels are mostly in the older end of the sailing fleet, hence included in the prior stated fleet demographics. The order book for new VLCs is benign, with about .3% of capacity on order. There will be five ships delivered this year, 24 in 26, 44 in 27, and 14 estimated for 28. Next slide here, we will give some general market commentary. The US is actively announcing sanctions and tariffs. Some will have limited impact on the market, but some could be of significant support to freight rates. Overall, we expect sanctions and tariffs to somewhat disrupt trade, but in contrast to the impacts from the Russia-Ukraine conflict, we expect VLCs to be in high demand. Sanctions and fiscal issues with some of the teapot refinery industry in China is resulting in changed procurement behavior of crude oil, as state-owned refiners are increasingly taking a prominent role, which likely results in a reduced role for the shadow fleets. China has announced supportive fiscal policy measures and stimuli, which we assume will drive increased economic activity and consumption. This combined with net new refining capacity coming on stream should result in some 300,000 barrels per day increased demand for 2025. We further note that refining margins in China has lately improved, signaling a successful reduction in inventories and increased economic activity. As mentioned in the business outlook, the spot market for modern VLCs with exhaust gas cleaning systems are now in the 55,000 to 60,000 dollar a day range. The good support and a possibly continued upward trajectory. There is significant interest from customers for time charter contracts reflecting an aligned view that the market is fast becoming tighter as the modern and compliant fleet is set to shrink over the next few years. 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 market, focusing on solid customer relations, offering safe and reliable services, maintaining a competitive cost structure with robust breakeven levels, a solid balance sheet, and a clear capital allocation policy. The whole VLC team appreciates this encouragement and continues to work hard and operate with leading governance standards and a high level of integrity. Operator, over to you.

Thank you. If you would like to ask a question, you'll 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 one and one again. Please stand by while we compile the Q&A roster. Thank you. We will start with our first question. This is from the line of John Chappell from Evercore ISI. Please go ahead.

Thank you. That's fine. So since the last call when I asked about, you know, kind of fleet development, you've sold Scandinavia and then you locked in the China. So it seems like you're de-risking some of the older vessels in your fleet. As we think about going forward, the differences now in maybe the optimism around asset values and time charter market, what do you think is the best path forward for, again, kind of the older ships in your fleet where maybe you don't need as much spot exposure? Is monetizing them a better alternative versus the time charter market or vice versa?

So two of, we have now three ships built in 2007 in our fleet. Two of them are on time charter. One which we talked about on this call, $40,000 a day for this year. And one that started in last summer, which is ending end of second quarter at $49,500 per day. So these are very good time charters. The third vessel is in the spot market. So, you know, we might consider to divest one or two other ships, you know, depending on time and price, obviously. So the two on time charter will continue to operate at least through their charters. But they also, these ships have basically no debt. So there is sort of an interesting opportunity in the future to invest that in a way and then reinvest the money in the company or one way or another in the line with sort of our capital allocation policies in general. So that's really all I can say now. But it's not that easy to sell all the ships. You might have an interest, but it might be a counterpart that you cannot transact with also. So that sort of raises the hurdle a bit to get it

right. Yeah, that makes sense. And then as far as the new builds are concerned, seeing the progress payments and what's laid out for the next 12 months, and you still have some time. But what was the what's kind of the model financing plan for those ships? Number one, and number two, just given the fuel efficiencies of them, etc. Have you received any interest thus far on potentially locking those in or is the plan to keep them kind of the optionality of using the market next year?

Thank you. So the base case to for debt financing those ships is a $60 million per vessel. But the chances are we might up that somewhat. And that's based on the sort of negotiations we have now on the financing that's intended to put in place. So if we finance more than the 60, we will then reallocate how the debt is distributed in the fleet potentially. So it should be sort of a very good outcome for the company. And we are quite excited about the terms and the commercial pricing of what we expect to put in place. Our target is to close this at some point in the second quarter of the year. So in general, we have great support from our banking group and have several sort of proposals on the table. Your next question was on the fuel efficiency of these ships and whether we have received any interest. So in general, there is significant interest for time charters. There are two clients in particular that have showed interest in the new buildings. But it's too early to say whether this is something we can execute on as normal. There's always a bit of a delta between what the customer wants and what we want. But I think with the tailwind from the spot market going forward now, it should be possible to get to something that could make very good both commercial and financial sense for DHT. Great. Thank you, Sain. Thank you.

Thank you. We'll now take our next question. This is from the line of Frode Markkadel from Clubs and Securities. Please go ahead.

Hello, I think your line is not the best. Can you hear me? Yeah, now I can hear you.

Okay, perfect. First question, can you just talk about the recent jump in VOCC spot rates? And yeah, what do you think these levels are sustainable? You know, what's driving the strength and how do you see the market developing from here?

I think the market in general is very, very tight. And you know, this sort of downward trajectory we had in the end of last year was mostly driven by some inventory changes and the lack of runs in the refineries in China. But that those inventories seems to have been worked off, as you can now see on the refining margins in China. So that's one aspect. The other is, you know, as I mentioned, the market is tight, finely balanced, and it didn't take much to bring the market down in one way. But more importantly, it didn't take much to bring the market up. So the sentiment in particular in the reaction to sanctions was very dramatic. The market moved very, very fast without, you know, necessarily more cargos in the market, but just on expectations. You had a little bit of a setback, but then we are back up again. And then now we feel that there's more substance in it. There's more cargo in the market. At the same time, as I talked about in detail, the fleet is really, really getting tighter and tighter. And there are so many pieces to the puzzle now. It's a bit hard to be precise on which component is the driving factor. And I prefer to look at it more like the tipping point, you know, at the glass at some point is just full, right? And it's overflowing. So in a way, that's what I think we are seeing, you know, potentially the beginning of. Good to hear.

Next is on the capital allocation. You talked about it, I guess, but you sold the ship in December and you sparked the proceeds to buy back shares at, you know, very attractive levels, I would say. So that made a lot of sense. But of course, now the stock is back to your one-time NEV more or less. So the question is, do you see better opportunities elsewhere, like secondhand vessel transactions, or are buybacks still on the table?

So I think just to clarify, the buybacks we did in December, they were done with the resources at hand. They were not dependent on us selling the ship. We felt there was a dislocation in the capital markets compared to the underlying dynamics of our business. So when we traded below nine bucks, we were acting on that. And I think in hindsight that proved to be a very good decision. As we also then stated, we have three purposes for the cash proceeds from the sale of Scandinavia. It's either investment acquisitions, as you asked about, buybacks or debt prepayments. Where the share price is pricing now, we are normally not buying back stock. We are always on the lookout for good investment opportunities in ships, but they are, you know, hard to find, frankly, as the number of aspects that has to be met in terms of age, ship design, delivery, etc. price, of course. But we have the capacity financially to do that if we want to. Then lastly, of course, there is debt prepayments that would reduce interest expense in the company. Then it's a detailed question of whether we then increase our RCF capacity so we can access the funds to other activities later if you want to, or as you've done many times in the past, focus the prepayments on taking out, install, schedule installments or AMRT over certain periods. So we are yet to finally decide on that. And there will maybe be more clarity on that when we present our first quarter earnings.

Okay, great. That's clear. Thank you.

Thank you. We'll now take the next question. This is from Omar Nocta from Jefferies. Please go ahead.

Thank you. Hi, Zwein. Good afternoon. I just had a follow-up on Froda's first question. You know, you're talking about the VLC rates basically jumping here over the past maybe four or five weeks to 55 to 60k range as you outlined. You mentioned that a big reason for that has been sentiment and then also just the fact that there's more cargo. What about in terms of just the actual sanctions themselves? Part of it obviously is sentiment, but have we seen an effect of that yet on rates? Have we seen shifts removed from service and that's partially why rates are rising or is that not even yet taking place?

I think you're right in saying that the primary driver at this early phase has been sentiment, but we are seeing as I alluded to here some change in behavior in China in how they procure oil, i.e. that means from whom or from which countries. And that also will relate to how it's going to be transported. So there were sanctions that you have seen for the Shandong sort of refinery complexes, which meant that ports could not take in ships that were sanctioned. So that is a real thing. Secondly, we understand that there are some tax issues with several of these refiners. That means that they will either face bankruptcy or transfer ownership to maybe state-owned entities. And this is already changing or driving the way oil is being procured. So that's why I'm saying I think there is also increased oil demand now and this is at the early innings I think for what's at play here going forward.

Okay, thank you. And then just a second question just on slide 10 where you outlined the BLCC fleet and how it's developing. The shadow fleet, you have the 105 and then you have the 92 that are sanctioned. Any sense, are you able to see what say the shadow fleet is trading, those 105 BLCCs, how they're trading today's market and then also what the other 92 are doing?

It's hard because there's no AIS to track, right? So there has to be sort of physically seen or through satellite images and you need to be live on this and it is not the task for the DST to do in detail. But I think for one, this fleet is very inefficient. So and with that, I don't think we should assume sort of a -for-one change. If a sanctioned barrel or a sanctioned ship is shifting to a non-sanctioned barrel, there's going to be more efficiency out of that. Exact ratio is hard to be specific on, but the compliance fleet obviously is more efficient or more productive if you like. But again, if you look at just the gradual shift now in sort of the gravity and we've also seen reports of some of these ships now being sold for demolition early on and you understand there are other discussions with brokers or breakers for some additional ships. So I think the DST stated earlier on that we looked at this shadow fleet as sort of the new scrapping in waiting until actual scrapping takes place and that might be the case now.

Okay and maybe just sorry, one final one just on them, just looking at the table, at the end of next year you'll have 184 VLCCs in the fleet that are 25 years or older. Do you, can you envision those ships sticking around once they hit that age or are they scrapped?

No, you have to have a trade where actually it's commercially possible to do it. And keep in mind one thing, it's not just whether the customer using the ship can say I'm okay with a -year-old ship, but you cannot nominate that ship to lift the cargo from say Saudi Arabia or from ports in Africa or US or whatnot because the terminals will not accept most of these ships. And it's the same in most discharge ports, where approval by the receiving facilities is also part of getting a deal done on the cargo. So all of this is just becoming very difficult. I have a very hard time to think that there are any commercial opportunities for these ships, maybe with a few exceptions, but the majority I think will be out of business.

Okay, all right, well very good. Thank you, Sain. Thank you, Omar.

Thank you. Your next question is from the line of Peter Haugen from ABG Sandal Collier. Please go ahead.

Good afternoon, Sain. A quick question on prices as we've spoken about now on the rate side, a lot of volatility, but in terms of the quoted prices for at least newer VLCC tonnage, nothing much has really changed over the past months. If you were to sell or buy, so what I guess I'm asking is the price of in the next transaction of a newer VLCC, so a resale VLCC, what would that transact that today, you think, if it were to happen?

So when you say resale, that assumes that it's sort of prompt delivery, so delivery now. So that will have to be one of the five ships that are scheduled to be delivered this year, and some of those ships are already out on time charter, so I think likely getting hold of one of those as a resale is going to be difficult. There are some opportunities for maybe 26 deliveries to pick up a ship under construction from, I would say, shipyards in China that have not built VLCCs before, so then you need to be a buyer willing to venture out in such a transaction, and given the fact that those yards have no experience, it will be at a lower price than, say, if the ship that comes from Korea or from an experienced yard in China. So the liquidity in this game is very, very thin. If we wanted to buy a -year-old ship, there are maybe potentially some things that can be done, but it's not like a full range of assets to pick up, so liquidity is thin. There is quite good liquidity on the buying side for ships that are sort of closing in on 15 years, that are 12, 13, 14 years, and there are a few buyers, and there are still some buyers in the ships that are yet to be 20, so have a couple of three years left in them. I think that with all the political stuff going on, there will be a need for some of the people that have been operating either on the ship or the ship that is in the fleet. So ships that are built in 05, 06, 07, 08, 09 maybe.

Okay, but if I were to pose a question like this, I have a -year-old ship which I'm asking, or which price is 114, would you then be a buyer or seller at 114, which is the price we would use for a -year-old ship in valuation of the VFC company today? You really expect me

to reply to that? Sorry, Peter, but I'm not going to comment on that.

Okay, okay. No, my intention was simply just to get a sort of feeling for whether these prices we now use is in the marketplace, too high or too low, but we'll continue to use them. If I can follow up with another narrow question here. In an event in which we'll see some deal being done making Russian oil available again, is it possible now to sort of understand that this is going to be speculation more than anything else, but for the VFC market, I mean, the VFC market didn't experience the same uplift when Russian oil was sanctioned. So I'm trying to figure out how the impact of Russian oil potentially then being not sanctioned again will make an impact on the VFC market here. Do you have any thoughts? I understand.

So I understand the question. So I think the key sort of restrictions that draw this dislocation in earnings between Afriamax, the Seas, and the Seas over these last two, three years was that the primary loading areas of Russian oil in the Baltic Sea and the Black Sea cannot accommodate the Seas. If those oceans have been able to accommodate the Seas, I tell you that these Seas would have gone to India and China with sanctioned oil, but that was not possible. So if Russian oil is for some reason now going to be redirected back to Europe, that will be much shorter hauls for the ships that have been engaged in long hauls in the smaller sectors such as Afrin and Seas Maxis, and the oil currently going to Europe will then go out to Asia again, which will be used on the ESA Seas. Hence my comment that I think the VSA Seas are the ones to stand out as the winners in what's going on now, how things will develop. And it might be a little bit hit on the nose for some of the smaller ships.

Okay. Okay. Thank you. Thank

you.

Thank you. And the last question today is from the line of Greg Lewis from BTIG. Please go ahead.

Yeah. Yeah. Hi. Thank you. Good afternoon. And thanks for taking my questions. I guess my first question is around the comments you made around maybe an increasing in demand in the time charter market. I guess earlier last month there was a trader that came in and took a couple vessels. I think it was for six, seven months maybe. Just as you see the time charter market developing, your view is a lot more insightful than ours. Is it largely a trader coming into this market? Are there captives that are coming in? And is it, hey, there's a new US administration and the next couple quarters are going to be messy? Or is it some of the fundamentals that you're laying out where, hey, supply looks tight for the next couple of years? And really, I'm wondering, are customers or potential charters starting to look to get a little bit longer?

Yeah. I understand. So the traders, they are basically always in the market and a lot of their pricing is driven by how the forward curve is looking or what they can do in the FFA market because they typically take off some of the exposure in the FFA market to take a profit or not. But I think what's gradually developing is that number of the end users, i.e. oil companies or refiners, some of their time charter fleets are shrinking because time charters are expiring and they also have business that they need to perform on. So they're becoming a bit light. Hence, there are a number of end users, if you could use that expression, or IOCs that are in the market now and interested in building up the fleets or replacing ships that are expiring. So we always at DHT have a very serious customer focus and try to engage with all of our customers deeply, not just in the smoke market. So I'm hopeful that there will be opportunities for us to develop some more fixed income for our fleet, exactly how much we can do raise to the scene and depends on the money. But there is real demand here from end users.

Okay, great. And then just my other question was, it seems to be a non-event, but I guess last month the US put some Chinese shipyards on their blacklist or whatever. I think it was companies ability to use those yards for like dry docking and special surveys. I would think it doesn't, but I just want to clarify that.

Yeah, I appreciate that you think that I can clarify it, but I'm afraid I'm not sure I can give you a credible answer to that. But I'm not so sure it's an issue. So at least not based on the information that's available to me now. So I'm sorry, I can't help you any further on that.

That was helpful in and of itself. Thank you very much. Have a great day. Okay, thank you. Thank you. Thank you.

Thank you. There are no further questions. I will now hand back to the speakers for any closing comments. Thank you.

Okay. Thank you for all for dialing in to the DHT's earnings call. Your interest and support is highly appreciated. Have a good day.