Hafnia Limited

Welcome to Hafnia's third quarter 2021 financial results presentation. We will begin shortly. You will be brought through the presentation by Hafnia CEO, Michael Skopf, CFO, Perry Van Echtelt, EVP Commercial, Ian Christopherson, and EVP Head of Investor Relations, Thomas Anderson. They will be pleased to address any questions after the presentation. Should you have any questions, you can submit them via the chat function or use the raise hand function to be unmuted to ask your question verbally. Questions will be answered at the end of the presentation. You will receive further 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. many of which Hapnea is unable to predict or control, that may cause Hapnea's actual results, performance, or plans to differ 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 a solicitation of an offer to purchase or sell any securities. With that, I am now pleased to turn the call over to Hafnia CEO, Michael Scov.

Thank you for this. My name is Michael Scov, and I'm the CEO of Hafnia. So let me welcome you to our third quarter 2021 conference call. Along with me today, I have our CFO, Peritha Nechtelt, EVP Commercial, Jens Christophersen, and EVP Head of Investor Relations, Thomas Anderson. The four of us will present the third quarter 2021 financials for Hafnir. Today's presentation agenda consists of three key areas. We will begin with an overview of Hafnir and key highlights of the quarter, followed by commercial updates on the product tanker market, and finally ending off with our ESG overview. Before we move on, I would like to take this opportunity to express my deep gratitude to all Huffington employees, both at sea and ashore, and stress our employees' health and well-being so we can continue to serve our customers. Let's move to slide number two. You should all be aware of the mandatory disclaimer that I would urge you to read. Moving into slide number four. Let me begin by introducing Hafnia. Hafnia is a fully integrated shipping platform with 100% aligned interest across all segments without any fee leakage. We have corded in Singapore with offices in three other key shipping hubs, namely Houston, Copenhagen, and Mumbai. We are listed on Oslo Stock Exchange under the ticker code Hafni. That's how the third quarter ended 2021. We owned and have charted in a diversified portfolio of 98 vessels across four product segments and commercially managed an additional 99 vessels, bringing us to 197 vessels under commercial management. This is a fully integrated shipping platform. There are six key areas to our operations. Apart from being a ship owner, We have a global commercial platform with chartering teams in Asia, Europe and the United States, which secures optionality and flexibility for our customers. We also have our own in-house technical management and bunker team. Our technical management team ensures that the highest safety and environmental standards are maintained on board. Our bunkering business is buying bunkers for more than 450 vessels for our pool platform and third-party owners. Deep revenue from our various operational segments has been strong and consistent. Based on this success, we will continue to develop our adjacent businesses. Lastly, we also have a strong focus on ESG. Besides reducing our emissions to A and C, We also strive to meet our social obligations for sustainable development. We take all of these responsibilities seriously and do our utmost to realize both social and environmental benefits. I would also like to take this opportunity to highlight six key factors why Hafner is one of the leading tanker companies. Firstly, Hafner is the largest operator of product and chemical tankers in the world. This on parallel scale will make the company more robust and sustainable, enabling improved earnings capability through the shipping cycle. Next would be our continuous focus to have the lowest operating and funding costs. Our operating cash flow rate even was $12,917 per day for the quarter. Our industry-leading financing costs, solid balance sheet, and low DNA expenses are also key contributors to our competitiveness. Following that is our solid business model with diversified revenue streams. Earnings from our various operating segments have been strong and consistent. We plan to expand these businesses further by adding more vessels to existing pools and focusing on new segments. We also have a strong relationship with our stakeholders, such as fans and industry partners, which gives us access to industry-leading debt financing, including the cost of debt and breadth of capital sources. At Hafnir, we have a clear ESG profile. As a leading shipping company, Hafnir's goal is to provide safe, sustainable, and efficient hydrocarbon transportation solutions. thereby contributing to the shipping industry's efforts to reduce environmental impact. Lastly will be the positive outlook post-COVID-19 rebound. With a recent increase in demand for refined products, leading to a sharp drawdown of inventories, we believe that the product market will recover in the near future. Moving to slide number five. The product center market was mostly subdued during the third quarter. Elevated crude oil prices attributed to OPEX Plus decision to limit the increase in oil production rate resulted in large slowdowns of both crude oil globally. This adversely impacted product center transportation demand in the third quarter. Let me now bring you through some key financial metrics for Hafnir's third quarter. For the quarter we achieved time-shared equivalent income of $88.7 million and an EBITDA of $29.7 million. Following a difficult quarter for the product market, we recorded a net loss of $20.7 million for the quarter. We will pay no dividends for the third quarter. While this is not satisfactory, we strive to continue controlling what we can. Over the years, we constantly benchmark ourselves against our peers to evaluate our commercial performance. When we look at these benchmarks, AFNI stands at the absolute top in all of our segments. The spirit of excellence results from the quality of our daily commercial decision making and constantly improving our understanding of the market conditions. The grass further reinforced this. For the third quarter 2021, we benchmarked some key metrics against our peers, and we can see that Hafni stands out from the rest in all segments. Moving on to slide number six. Let me now bring you through a key event that we concluded earlier this month. Hafni has entered into an agreement to acquire chemical tankers including the fleet of 32 vessels through an issuance of new half-year shares. The number of shares to be issued and performer ownership has been determined through an NAV for NAV framework based on respective balance sheets and the predefined vessel value methodology performed by a mutually agreed panel of five reputable shipbrokers. As a result, AFNA will issue new shares to CTI shareholders representing approximately 21.5% of the outstanding shares in the combined entity. Post-transaction, Hafni will own 133 vessels with more than 230 vessels under commercial management. The combined entity will continue to operate as Hafni Limited and trade on the Oslo Stock Exchange with the typical code Hafni. commitment to growing its platform to maximize shareholder value. We can achieve improved earnings capability through the shipping cycle by complementing the existing commercial utilities in the energy and MR segments, whilst enabling enhanced trading flexibility through the ability to carry clean petroleum products and chemicals, limiting balance time by optimizing triangulation and offering material cost synergies. There are many other attractive synergies to be achieved from this transaction. With this improved operational scale, we can expect overall cost savings and improved access to capital. We can expect synergies in improving vessel utilization and TC earnings with COA-based chemicals trading with periodic cross-trading in clean petroleum products on the commercial front. We can also expect synergies that have been existing to improve their TCEs, in particular during the low market cycle. With this increased scale of over 230 vessels for our pools, we can further expand our pool business into new segments to operate the vessels. This will help us to add additional pillars to our already successful pool business. We also expect to expand our bumpering business further for the chemical market participants once that has been established. With that, I will hand it over to Kerry to take us through the financials.

Thanks, Michael. The third quarter continued to face pressure on rates due to weakened oil demand in Asia and a hurricane season in the U.S. This, combined with lower rates, resulted in a net loss of $20.7 million for the quarter and and $47.6 million for the first nine months. Despite this, the outlook for the fourth quarter onwards remains positive. Vaccination rollouts have been progressing swiftly in most economies, and this has resulted in the easing of movement restrictions in many countries, as we are already seeing borders opening up in several countries. We have already seen an improvement in demand for jet fuel, and this is anticipated to continue. Seasonally, the fourth quarter also tends to experience higher demand for oil and oil transportation. Income from the management of third-party vessels and buying bunker on behalf of third-party clients was $4.5 million for the quarter, totaling $15.5 million for the first nine months of the year, but more on pool earnings later. We saw a return on equity of negative 7.3% for the quarter and a return on invested capital of negative 1.6%. The balance sheet, though, remains strong with an equity ratio of 45.2% and a cash position at the end of the quarter of $75 million. Moving on to the next slide. For the quarter, we saw TCE of an average of $10,643 per day, totaling $88.7 million for the quarter. This can be further divided into the key sectors that we operate in. The TCE was based on 8,337 earning days, making $22,816 per day on the LR2 vessels, $9,828 per day on the LR1 vessels, and $9,955 per day in the MR segment, and ultimately $9,275 per day in the Handy segment. Then OPEX, which includes our vessel running costs and technical management fees, was $51.4 million this quarter, which results in an average of $6,813 per day across the fleet. The OPEX was based on 7,550 calendar days with $631 per day on the LR2 vessels, $727 per day on the LR1 vessels, $6,268 per day on the non-pool Panamax vessels, and then $6,814 per day in the MR segment, and finally $6,647 per day in the Handy segment. G&A per day for the quarter was $698 per day. We project our full-year OPEX per day across the fleet to be $6,792, and G&A per day to be $824. Then moving on to the next slide. Hapnia operates vessels in four pools, which range from the largest product tankers to small specialized chemical tankers of under 20,000 deadweight tons. Our highly specialized chartering and commercial teams are responsible for developing, marketing, and negotiating all contracts for vessels that the pools operate. The diagram on the left shows key features of our pool economics. Firstly, Hafnia receives pool management commission in the form of a fixed fee and a percentage of all net pool income. Working capital upon entering the pool also ranges across the different sectors from $750,000 for the LR pool to $250,000 on the specialized pool. Pool earnings distribution occurs twice a month. The pools follow a basic pool point distribution based on two core performance variables, fuel and time. As you can see, the number of commercially managed vessels in our four pools have been steadily increasing over the past years. And I want to highlight that Hagnia has recently reached a noteworthy milestone in our pools. In the past week, we enrolled vessel number 200 into the pool fleet, and this represents a tenfold growth from the day of the establishment of Hagnia back in 2010. With this success, we will continue to invest in our commercial platform to increase the service level and build skill in the pools through adding external vessels with the right pool partners. Jens, why don't you take the next few pages?