Hafnia Limited

Welcome to Hafnia's third quarter 2020 financial results presentation. We will begin shortly. You will be brought to the presentation by Hafnia's CEO, Michael Scott, CFO, Terry Van Etel, EVP Commercial, Jens Kristoffersen, and EVP Head of Investor Relations, Thomas Anderson. We will be pleased to address any questions after the presentation. Should you have any questions, please just call one on your telephone keypad or type your questions into the chat box on the website. You will receive all the instructions as required. Certain statements in this conference call may constitute forward-looking statements based upon management's current expectations and include known and unknown risks, uncertainties, and other factors. Happiness unable to predict or control that may cause happiness actual results, performance, or plans to perform materially from any future results, performance, or plans expressed or implied by such forward-looking statements. In addition, nothing in this conference call constitutes an offer to purchase or sell, or solicitation of an offer to purchase or sell in security. With that, I am now pleased to turn the call to HACNA CEO, Michael Schaaf.

Thank you very much for that. My name is Michael Skolf, and I am the CEO of Hafnir. And I would like to welcome you all to the third quarter 2020 conference call. With me here today, I have our CFO, Per van Echtelt, the EVP commercial, Jens Christoffersen, and EVP head of investor relations, Thomas Anderson. The four of us will present the 2020 third quarter financials for Hafnir. Moving on to Slide number two, please have a thorough look of the mandatory disclaimer and make sure that you have better understood it. Moving forward, the short agenda that shows what we're going to go through today, we will go through the Q3 highlights and overview. We will then talk a little bit about our view on industry and the market in general and end up with a governance and ESG overview for Hafnia as well. So with that, let's move to slide number five, which deals with the highlights from the third quarter. So the first nine months of 2020 have been among the most extreme periods in the product change space, and I'm pleased that Hafnia delivered the best third quarter result in the last four years with a small positive result. However, due to COVID-19, we're now all living with confinement restrictions leading to demand destruction and weak economic fundamentals. This negatively impacts our short to medium-term market outlook. We're very proud of having established the Hafnir Specialized Pool, adding an additional pillar to our successful pool management business. In addition to that, we have together with a strategic joint venture partner, invested in a methanol project, exemplifying our strategy to look at sustainable and modern shipping technologies, as well as securing long-term transportation contracts at guaranteed rates. In our Vista joint venture, we have invested in two dual-fueled LR2 vessels that are chartered out to Total on long-term contracts. And finally, we have sold the LR1 vessel Hafni America for $11.6 million, and the vessel was delivered earlier this week. I would very much like to thank all our employees, both at sea and ashore, for their extraordinary efforts during these challenging times, and stress that the priority for Hafnir will always be the health and safety of our employees. Moving into the highlights of the third quarter financials, the time trial equivalent earnings for Hafnir was $118.5 million for the quarter and $518.9 million for year-to-date. EBITDA was $51.7 million for the quarter and $327.2 million year-to-date. The commercially managed pool and bunker business generated an income of $5.2 million for the quarter and $18.5 million year-to-date. In Q3, we achieved a net profit of $400,000, and our net profit for the first nine months of 2020 amounts to $175.2 million. Huffington has invested $10 million together with a strategic joint venture partner for 3.33% of a pre-FID methanol project converting regionally sourced natural gas to methanol, with a 3.6 million tons per annum production capacity, of which the joint venture will be transporting one-third on 19-year contracts. In addition to investing in the methanol plant, the joint venture will be building the vessels, transporting their share of the methanol. The exact vessel composition is still under negotiation. The investment shows the focus we as a company have on long-term contracts and alternative fuel vessels being LNG, methanol, or ammonia. Jens, why don't you talk us through the market on the third and fourth quarter? Thank you.

Thank you, Michael. Overall, first, oil tanker earnings in Q3 2020 were attributed to a weak oil product demand, low refinery utilization from muted refinery margins, and the buildup of active tonnage supply from the steady unwinding of vessels which were in floating storage. Oil demand has recovered throughout the quarter from its lows during Q2 2020, but continues to remain below 2019 levels whilst the feed supply grows gradually. The bottom chamber market in the West outperformed the East during Q3, mainly driven by lower tonnage supply and good U.S. Gulf demand. Tonnage supply had migrated west to east during Q2 and could not find its way back to the west due to the scarcity of the usual jet and diesel trade, which under normal circumstances would bring tonnage from east to west. Forer tankers in the east faced fierce competition from VLTCs and Suez Maxis new buildings in the face of a weak crude tanker market. The U.S. gold market demonstrated strength during the beginning of Q3, as refineries increased production by more than $2 million per day towards the end of June. The increased refinery production caused the freight market to rise significantly until mid-August, when low refinery margins and the occurrence of hurricanes reduced refinery production significantly. Given the challenging market environment, we're satisfied with our TCE earnings of $27,702 per day for the LR2 segment, $14,698 per day for the LR1 segment, $12,709 per day for the MR segment, and $10,399 per day for the Handy segment. On slide seven, The product tanker market in Q4 2020 so far has been an extension of the suppressed market in Q3 2020. Oil demand continues to be weak on the back of the second wave of coronavirus, particularly in the West. Similarly, the product tanker market outlook at present remains somewhat bearish in the short term due to the surging second wave of the pandemic in the West. However, Current positive trends in drawdowns of product and crude oil inventories look likely to continue for the rest of 2020 and into early 2021, and while vessels will unwind from floating storage. This development was expected, and it is part of the road towards a more sustainable market environment. Winter seasonality is expected to have a positive impact on the product-training market, which we continue to consider reasonably balanced as we register trade volatility despite the general suppressed earnings levels. Specifically to the handy segment, the clean handy markets in Europe suffered from low demand, and dirty markets have fared marginally better. The average quarter-to-date earnings in Q4 are approximately $10,000 a day, with current average earnings of $8,000 to $10,000 a day. The MR segment, MR rates east of Suez have improved marginally during Q4 as a result of improved oil demand. Western markets have suffered from lower oil demand and continue to be seasonally weak. The average quarter-to-date earnings so far have been approximately $11,000 a day. The current average MR earnings are $10,000 to $11,000 a day. In the LR1 segment, LR1 rates in the east have gradually picked up, As a result of improved oil demand and higher Chinese exports, Western markets are suffering from low oil demand driven by COVID-19. The average quarter-to-date earnings for the LR so far has been approximately $13,000 per day, with the current average spot market of $13,000 to $15,000 a day. Fungus, which make up a significant part of our expenses, In the first half of Q4 2020, the spread between high sulfur fuel oil and low sulfur fuel oil narrowed to $65 per metric ton. The spread for 2021 is currently $75 per metric ton. So we still don't see any economic incentive for scrubber investment in medium-sized product hangers. Harry, why don't you take the next few slides?