DHT Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Q2 2025 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 will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, DHT President and CEO, Svein Moxnes Harfeld and Lila Halvorsen, CFO. Please go ahead. Your line is open.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' second quarter 2025 earnings call. I'm joined by DHT's President and CEO, Svein Moxnes Harfeld. 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 August 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 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. As usual, we will start the presentation with some financial highlights. In the second quarter of 2025, we achieved revenues on TCE basis of 92.8 million and adjusted EBITDA of 69 million. Net income came in at 56 million equal to 35 cents per share. After adjusting for the 17.5 million gain on sale of vessels related to the sale of DHT Lotus, the company had a net profit for the quarter of 38.6 million equal to 24 cents per share. Vessel operating expenses for the quarter were $19.6 million, and G&A for the quarter was $4.6 million. For the second quarter, the average TC for the vessels in the spot market was $48,700 per day. The vessels on time charters made $42,800 per day, while the average combined TC achieved for the quarter was $46,300 per day. DHD continues to show robust balance sheet with low leverage and significant liquidity. We have continued to strengthen our balance sheet and the second quarter ended with total liquidity of 299 million consisting of 82.6 million in cash and 216.5 million available under our two revolving credit facilities. At quarter end, financial leverage was 14.1% based on market values for the ships, and net debt was 10 million per vessel, well below estimated residual ship values. On this slide, we present the cash flow highlights for the second quarter. We started the quarter with 80.5 million in cash, and we generated 69 million in EBITDA. Ordinary debt repayment and cash interest amounted to $19 million, and $24 million was allocated to shareholders through a cash dividend. $6.1 million was used to acquire the additional shares in Goodwood Ship Management. $1 million was used for maintenance capex, and $39 million was used for a new building program. Proceeds from the sale of DHC Lotus was $51 million. 52.6 million was used for prepayment of long-term debt, while net issues related to the refinancing of DHT Jaguar was 4.5 million. Positive changes in working capital and other amounted to 16.5 million, and the quarter ended with 82.7 million in cash. With that, I will turn the call over to Svein.

Thank you, Laila. It has been an active quarter for DHT, both closing projects that had been in the works for some time, as well as new ones. We will here take you through our quarterly highlights, although several of these events have been communicated previously as subsequent events to the first quarter report or as separate events post the first quarter report or in the most recent business update. Firstly, the DHT Appaloosa entered a seven to nine year time charter contract with the global energy major. The contract has a fixed base rate of 41,000 per day, plus a profit sharing structure in which earnings in excess of the base rate will be shared 50-50 between the customer and us. She delivered into the contract in May. We entered into agreement to acquire a modern second-hand vessel built at Hyundai South Korea in 2018. She has large dead weight, is fitted with exhaust gas cleaning system and is a sister of vessels already in our fleet. We have very good experience with these ships both commercially and operationally. The price is 107 million and is in line with current broker values. This fleet addition will replace some of the divested earnings following the sale of older ships. The acquisition will be financed with available liquidity and projected new mortgage debt. Expect to take delivery towards the end of this quarter. We sold the DSG Lotus and DSG Peony built in 2011 at Buhai Shipbuilding in China. The two vessels were sold for a combined price of 103 million. These two vessels were acquired in 2017 as part of the acquisition of BW Group's VHC fleet for an aggregate price of 115.8 million, and have served as well. The DHT Lotus was delivered in April, and we recorded a capital gain of 17.5 million during the quarter, and net proceeds were 50.9 million. The DSG Peony was delivered in July, and we expect to record a gain of $50.5 million in the third quarter, with net cash proceeds of $50.1 million. DSG Bahinia, built in 2007, was fixed on a one-year time charter contract with Global Energy Company at $41.5 thousand per day. She commenced the contract in May. Then we acquired minority legacy shareholder positions in Goodwood Ship Management for 6.1 million and the company is now 100% owned by DHC. The company undertakes technical management and crewing for all our vessels including recruitment, employment and training of our seafarers through our offices in Singapore and Mumbai, India. The entire DSC fleet has been re-flagged to the Marshall Island registry and there were some expenses recorded in OPEX related to this during the second quarter. We have entered into a new credit facility to refinance the DSC Jaguar built 2015. The facility is 30 million with a six-year tenor and a 20-year repayment profile. It is priced at SOFR plus a margin of 175 bps and is otherwise in line with the DHT-style financing. On this slide, we will provide you with a new building financing update. We have entered into a 308.4 million secured credit facility to finance our four new buildings. The facility is co-arranged by ING and Nordea with backing from KSHORE. It is competitively priced at SOFR plus an average weighted margin of 132 bps. The facility has a 12-year tenor and a 20-year repayment profile. We should highlight that the facility does not include a prepayment option in favor of the lenders halfway through the tenor. Hence, it has a true 12-year tenor with respect to both maturity and pricing. The financing underscores the confidence existing lenders have in DHT, our robust financial position and our strategy. The new building project has a total capex just shy of 520 million. We have paid basically 180 million in installments to date. Combined with the announced credit facility of 308 million, we have an estimated 31.6 million in remaining capex, which we plan to fund through cash flows from operations and or existing liquidity. We view this as a very comfortable position for the company. Now we will discuss capital allocation and dividends. As per our capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends, the dividend for the second quarter of 2025 is declared at 24 cents per share and marks our 60 seconds consecutive quarterly cash dividend. The shares will trade ex-dividend on August 18 and the dividend will be paid on August 25 to shareholders of record as of August 18. In the graph to the left, we estimate our estimated P&L and cash break even levels for the second half of 2025. As you will see, the difference between the two is estimated at $7,800 per day for this period. This discretionary cash flow will remain in the company and be allocated to general corporate purposes, with the intention being to fund the remaining 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 now $2.75 per share and reflects well during a period in which our share price has appreciated and we made share buybacks equal to 2.3% of the company in addition to the quarterly cash dividends. Now with an update on the bookings to date for the third quarter of 2025. We expect to have 805 time charter days covered for the second quarter at $40,500 per day. This rate assumes profit sharing for the month of July and only the base rate for the month of August and September for the time charter contracts that has profit sharing features. We assume 1,150 spot days in this quarter, of which 73% have been booked at an average rate of $38,500 per day. The third quarter started in a disappointing fashion, but we sense a potential turnaround as we speak. The spot P&L breakeven for the third quarter is estimated at $20,000 per day, a number you may use to estimate the net income contribution from our spot fleet for the third quarter. As we have repeatedly stated, it is our view that the dynamics of our market is increasingly being a favorable supply story, with a rapidly aging fleet exceeding a benign order book of new ships and a string of sanctions making it increasingly challenging to trade older ships in the shadow fleet. There are a number of other factors as well that we expect to come into play. The US is proposing tariffs on India's continued import of Russian oil, There are already signals of a shift in India sourcing its seed stock, supporting the SUSEMAX and the VFCC trades. OPEC has announced several increases in production. So far, this has had limited impact on our market. But with peak season for domestic power generation demand in the Middle East nearing its end, we expect a rise in seaborne exports towards the end of the third quarter. We notice that refining margins are reassuring, supporting demand for feedstock. And Brazil has recently entered into a supply contract for crude oil to China, which is supportive of the VLCC trade. In addition, we see several potential triggers that could act as tipping points in favor for a very strong VLCC market. One, improved arbitrage economics for Atlantic Basin Barrel to be sold to Asia. 2. Escalating levels of sanctions and importantly enforcement of these. 3. Reentry of Venezuelan crude oil into the compliant markets. 4. Renewed attention to transshipment of sanctioned oil in Malaysian waters. 5. De-escalating in trade and tariff tensions. 6. Macro tailwinds with a resilient global economy, reasonable oil prices and a positive Chinese economic read-through. We continue as always to focus on what we can control and delivering on what we believe is a resilient business approach and strategy. We receive encouragement from our key stakeholders, shareholders, customers and lending banks. Irrespective of which constituency you belong to, you should expect us to focus on solid customer relations with safe and reliable services, a competitive cost structure with robust break-even levels, a solid balance sheet a clear capital allocation policy to create long-term shareholder value. We appreciate the encouragement, and the entire DSG team continue to work hard and operate a leading governance standard and a high level of integrity. And with that, we open up for questions. Operator?

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 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 as we compile a Q&A roster. Our first question comes from the line of Frodo Morkadel of Clarkson Securities. Please go ahead. Your line is open.

Thank you. Hi, guys. Hi, Frodo. Yeah, the first question I had is on the, you mentioned it briefly, you know, this tariff on India. Maybe you could elaborate what kind of effects you've seen so far in terms of chartering activity and, you know, do you expect that to continue, basically, have a meaningful impact on the, let's say, conventional tech market going forward?

It's a bit early days, but some sort of numbers so far. At the end of the second quarter, so end of June, India imported basically 2 million barrels per day of Russian oil. And this oil was transported predominantly in smaller ships. For July, this has come down some 20% in volumes. And we see also similar sort of trend lines for August. And this will in general favor larger ships. So we have to, of course, continue to see this development. There could, of course, also be some sort of deal with India and the U.S., that will maybe not take out all of this, so it's a bit early to say. But I think a 20% start for July, maybe similar levels for August, if not more, and then let's see what happens. But there are already inquiries in the market for them to purchase feedstock from further afar to be loaded on big ships.

Okay. Yes, good news. Second question I have is on this fixture. You fixed an 18-year-old ship for one year at 41,500 per day, which, given the age of that ship, is relatively strong, right? At least when I look at the vessel values, probably 44 million or so for a similar type of ship. I actually assumed... let's say 10, 12% unlevered return, you only required like 30,000 per day over time to justify that type of valuation, right? So, you know, that rate to achieve look quite strong. So yeah, the question is, do you think this kind of fixtures can be repeated? And what does it tell you about the, you know, the case of higher secondhand values?

I think, you know, for the last year or so, we have been quite successful in securing time charters for our older vessels. And all these charters have basically started with the forehandle. I think the lowest was 40 and the highest was 49 and a half. And, you know, there are several things. This one, of course, is the return on the capital employed in this asset based on the cost. It's a very good return for our shareholders. But also, the older ships are a bit more exposed when you get the volatility in the spot market. So when you have sort of weaker periods, then you are sort of exposed to waiting time and maybe less customers being willing to fix an older ship unless there's a discount. So to create stability in earnings for those ships, for us, we think has made a lot of sense. And of course, we appreciate that the customers are fine with also using ships that are older. They are in technically excellent condition and they run very well, we believe. So this is something we will try to continue to do, I think, as long as the money makes sense.

Sounds good. Thanks.

You're welcome.

Thank you.

We will now take our next question. Please stand by. Our next question comes from the line of Sharif Al-Maghabi of BTIG. Please go ahead. Your line is open.

Hey, thanks for taking my question. So, you know, you talked about it in the presentation earlier this week. OPEC announced they're going to finish unwinding those cuts earlier than expected. Most of that crude is probably going to find its way onto these. And I'm wondering how that's changed your conversations with charters given all this unexpected crude entering the market.

Yeah, you know, as a company, we have a very sort of key focus on customer relationships. And we have a lot of repeat business with our customer base. And, you know, we are regularly talking with them. And we do sort of sense that there is – increased interest and focus on having, you know, good access to VCC capacity in some shape or form. And, you know, that should bode well for us. And, of course, the customers are very close to the action. So if they are increasingly interested in having those conversations, I think this is a bullish signal for the VCC market and also for DHT then.

Thanks. And for the vessels you sold, Lotus and Peony, You've got two other ones in the fleet of a similar age and a handful that are just a little bit younger. When you think about fleet renewal, is there a focus on maintaining fleet size the way you have with the acquisition of the newer tanker on the water, or is it more of a case by case approach?

Of course, we have a fleet renewal concept in a way, but we are looking at what creates most value for the company. Lotus and Peony have a particular feature that they will build at the Buhai shipyard in China. And given some of the dynamics with the US, there were some benefits in sort of fine-tuning our proposition to customers. Hence, we decided to sell them. They've also been very profitable investments, and we think we got a good price for them. And the business that they have mostly been involved in would sort of come to an end because of age. This is a particular trade where they've been active. So it was natural for us to sell them. We had a buyer who would take both of these sister ships in one go. And we did replace, of course, one of them, you could argue, with the more modern ship we acquired in the second quarter. We are always on the lookout of new things. I dare suggest that we get to see everything. And we also get to see things that we pass on. So it's not like we'll buy everything that's being presented to us. But the focus is on creating shareholder value and on earnings per share. So if we can do that confidently for the business, we are still able and willing to invest.

Understood. That's great, Kalle. Thank you.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Jonathan Chappell of Evercore ISI. Please go ahead. Your line is open.

Thank you. Good afternoon. Fine. In the market commentary, you laid out all the possible positive catalysts that could happen in the VLCC market. But you also said the third quarter started out somewhat disappointing. So it feels like we've been waiting for this VLCC reversion to being the best-performing crude carrier class for some time, and it's just kind of stubbornly hasn't gotten there yet. So maybe what's been in your mind the reason for the disappointment recently? And I guess just to be balanced, what are some of the negative potential catalysts that can keep the VLCCs from performing as you expect for the rest of the year?

That's a good question, of course, and it's always difficult to be very precise on this. But we do believe that the second quarter had a significant markup in earnings compared to the first quarter. And I think some of that has been inventory building in China. And then, you know, when you build inventory, then suddenly that comes to a halt or temporary halt. So that combined with these additional barrels from OPEC suddenly being then used for power generation has not been a good combination, also with the loss of the sort of west-east arbitrage of the U.S. crude, where also production, frankly, has tapered off a bit. And I read reports now that the U.S. refinery utilization is now up to 96%. That is not only because of demand growth or robust demand in the U.S., but it's also of some domestic production tapering off. I think the combination of these factors is what sort of now gave us a little bit one on the nose coming into the third quarter. But I do sense it's temporary. I view Saudi Aramco in particular. I don't think there's anybody else that knows more about the oil market than those guys. I have some confidence in them knowing what they're doing. If you look at the oil price, the market seems to be willing to absorb these reversals of cuts and that oil coming to the market. There's still sanctioned barrels at risk here, so exactly how this will play out is hard. I think the bigger question in terms of risks is so far the world economy has shown resilience to a lot of the call it noise or uncertainty created by trade and tariff discussions. So if the world economy is not able to hold up that resilience, then of course, that will have a negative impact on where we are. So I think that's really the key risk is the latter to see how that really plays out. So far so good. Thank you.

A little bit of a housekeeping. If I can get a follow-up really quick. It seemed like there were some scheduled off-fire days in 2Q. It's been a while since that happened. Can you just give us an update on what the dry dock schedule looks like for the rest of this year and maybe even into 26?

Yes, we have one ship now in the second half for dry dock. That's it.

That's it. Great. Thank you.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Omar Nocta of Jefferies. Please go ahead. Your line is open.

Thank you. Hey, guys. Good afternoon. A couple of quick ones for me and maybe just a follow-up to start on the India discussion. Vine, you mentioned volumes from Russia into India are down 20%, which is, say, 400,000 barrels. From your sense or if you're able to see Has that 400,000 just disappeared from the market or is it being shipped somewhere else?

From the report that I read on these details, it is suggesting that the feedstock is acquired from other sources and predominantly the Middle East. But India has widened their sourcing of feedstock. If you look at statistics over time or pre maybe the Russia-Ukraine conflict, then Middle East represented about 60% of feedstock and then the rest being sort of Atlantic barrels. So I'm not sure exactly how this is played out now. I guess we'll have to look at this after the fact once these trade statistics come out.

Okay, yeah, I appreciate that. Thank you. And then just a... Financing question, in terms of the 2018 vessel that you're acquiring, looking at the Jaguar, you've refinanced that with $30 million, which looks maybe to be about one-third or so the value of that ship. What kind of debt are you looking to put on to this latest acquisition?

We like to run with a strong and maybe for some people a bit of a conservative balance sheet. We have several offers to finance this vessel. There are different considerations because we have a sense that we can set a new level of cost in financing second-hand vessels for the company, so it will be probably very competitive. maybe a bit longer tenor. So maybe we, you know, on this particular facility, we'll borrow on a relative basis a bit more, but use maybe that excess funding to prepay some other debt and just improve the general cost for debt for the company. So this is sort of stuff in the works. So we will advise the market in due course on that. But it's a super comfortable position to be in. So it's going to be competitive, we think.

Okay, good. And then maybe just one final one, then I'll pass it back. The first of your four new buildings delivers in, say, perhaps maybe six months or so. What's the charter appetite look like to take that on charter? And I guess what's your appetite to do so?

The first ship is coming in January. And there's been, you know, I would say... high-level interest from some of our core customers in these ships for different types of discussions, but it's a bit early yet. But these ships are going to be very, very good. There's nothing like it in the water today, so they do attract interest from some big customers. So let's see, we order those ships without employment and are comfortable of keeping them also in the market. They're going to be phenomenal earners. But if there's some true long-term business available to those at acceptable returns to DHT, then of course we will entertain that. It could be a mix, you know, and we have to see. I do think that the next sort of six months or maybe less, four or five months will give us a better feel for how this will develop. So maybe on our next earnings call we have a, you know, better view is maybe the wrong word, but more clarity on, you know, whether initial interest will actually develop into real business interest.

Yep.

Great.

Okay. Well, thank you for that. It's fine. I'll pass it back. Thank you. Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Jeffrey Scott of Scott Asset Management. Please go ahead. Your line is open.

Thank you. Good afternoon. Two questions. The first one has to do with demolition activity or actually the lack of same. The sanctioned fleet, the dark fleet, is primarily the over 20s. To the extent that that dark fleet is highly utilized, there's little incentive to send them to the breakers. Are you able to track the utilization rate of those sanctioned vessels, the dark fleet vessels?

It's limited because they are not always keeping their AI systems on board, so you need pretty advanced satellite systems to keep track on this. There are some companies doing this, so we have access to some of that information. We assume that in the best case the productivity of this fleet is maybe 50% compared to the compliant fleet, possibly less. But they get phenomenal freight for doing these jobs, so they maybe can afford it and the ships are older. I think lack of scrapping, the dynamic is so that people that buy these older ships to operate them in the shadow fleet or sanctioned fleets, They are paying quite robust prices, and of course this is then influencing the price a ship owner wants to sell his ship for demolition. And if you run a scrapyard, you buy a ship and it takes you quite a good while to take it apart and to recycle and sell all the pieces. It's not just the steel, it's also equipment, spare parts, copper from cables and stuff like that. So the working capital load for a break yard is quite significant compared to what it was when the old leases used to cost 10 million bucks. So this is a challenging dynamic, and I've been on record saying I think you need some global efforts to get this business going, because these guys, if they want to finance such an acquisition, they cannot do that with bank financing from a buyer that's sanctioned or been in sanctioned business. So this whole business sort of stalls. We would need a global effort, somebody like the World Bank stepping up to sanction the demolition of these ships and provide financing for all these breakers for that to happen. Otherwise, the new scrapping will be that these ships will just be abandoned and left with no people on board and the anchor drops somewhere and become environmental disasters.

Okay, thank you for the color. Another real quick question. Back in April, you announced the financing at SOFR plus 175, and then in July, the $308 million facility at SOFR plus 132. Was there something unusual in this facility or are banks just more interested in financing shipping business or is DHC just qualitatively better than any of your competitors?

You know, we have a very strong balance sheet and we've been in this game for quite a while now, so I think our track record in running the company in a sort of credible fashion is there. So we have a very stable group of banks, seven banks that are supporting us. Our leverage is very, very low and the only thing they complain about is that they cannot lend us enough money. So when we need that, it's competitive. The Jaguar is a bit of, I think, you know, not a typical financing. It has a combination with part of the new building package, you can say. And it's a bit of an older ship that was refinanced. We expect the acquisition we made now in the second quarter, the 2018 build ship, to be priced meaningfully less than that DST Jaguar financing.

The spread is substantially lower than what's been disclosed by your competitors. Do you see that as well?

I think we are viewed as an attractive counterpart for our banks, and of course that is then reflected in the pricing.

Okay. Thank you very much.

Thank you. There are no further questions. Speakers, please continue.

Thank you very much for all listening in on DHT's conference call. We appreciate the interest and support and wishing you all a good day ahead.

This concludes today's conference call. Thank you for participating. You may now disconnect.