DHT Holdings, Inc. Price & Performance (DHT)

As an exhibit to our form six k. As a reminder, on this conference call, we will be 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 to reflect in these forward looking statements. We urge you to read our periodic reports available on our website and on our [indiscernible] 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 are pleased to report on another quarter with a respectable performance for DHT. In the first quarter of twenty twenty five, we achieved revenues on TCE basis of $79,300,000 and adjusted EBITDA of 56,400,000.0 Net income came in at $44,100,000 equal to $0.27 per share. After adjusting for the $19,800,000 gain, on sale of vessel, related to the sale of DHT Scandinavia. The company had a net profit for the quarter of 24,300,000.0 equal to $0.15 per share. Metal operating expense for the quarter were 17,800,000.0 and G and A for the quarter was DKK5.5 million. For the first quarter, the average TCE for the vessels in the spot market was $36,300 per day.

The vessels on time charters made $42,700 per day, while the average combined TCE achieved for the quarter was $38,200 per day. DHT has a robust balance sheet with low leverage and significant liquidity. Have continued to strengthen our balance sheet and the first quarter ended with total liquidity of $277,000,000 consisting of $80,500,000 in cash, and 196,200,000.0 available under our two revolving credit facilities. At quarter end, financial leverage was 16.9%, based on market values for the ship. And net debt was $12,300,000 per vessel. Well below estimated residual ship values. On this slide, we present the cash flow highlights for the quarter. We started the quarter with $78,000,000 in cash, and we generated $56,000,000 in EBITDA. Ordinary debt repayment and cash interest amounted to 19,000,000 and $27,000,000 was allocated to shareholders through a cash dividend. Million dollars was used for our newbuilding program, 42,500,000.0 was net proceeds, from the sale of DHT Scandinavia, while 32,400,000.0 was prepaid under one of our revolving credit facilities and can be re borrowed in the future. Positive changes in working capital and other amounted to 8,400,000.0 and the quarter ended with 18,500,000.0 in cash. With that, I will turn the call over to Svein.

Thank you, Elena. We will here take you through some quarterly highlights.

We sold our older ship to the DHT Scandinavia and built in 02/2006. For 43,400,000.0. She delivered in January, and we recorded capital gain of $19,800,000 during the quarter. She was debt free and the proceeds will be allocated to general corporate purposes here under investments in vessels, or share buybacks, and or prepayment of debt. We entered into two time charter contracts. Firstly, the DHT China, built 02/2007, hence one of our older ships, was fixed to a leading commodity trader for one year at $40,000 per day. The contract commenced in January. Secondly, we fixed the DHT Tiger, built 02/2017 to one of our largest customers, an oil major, for a year at $52,500 per day. This contract commenced at the March. On this slide, 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 first quarter of twenty twenty five is declared at $0.15 per share. This is and marks our sixty first consecutive quarterly cash dividend. The shares will trade ex dividend on May 21, and the dividend will be paid on May 28. In the graph to the left, we share our P and L and cash breakeven levels for 2025.

As you will see, the difference between the two estimated at $7,200 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 twenty twenty two. The accumulated amount of dividend is $2.51 per share, and reflects well during a period in which our share price is appreciated. And we made share buybacks totaling $32,000,000 equal to 2.3% of the company in addition to the quarterly cash dividends. Here we update you on the bookings to date for the second quarter of twenty twenty five. We expect to have seven eighty time charter days covered for the second quarter at $42,200 per day. An improvement when compared to the prior quarter. This rate assumes profit sharing for the month of April, and the base rate only for the months of May and June for the time charter contracts that has profit sharing feature. Given the current spot market, there is potential for additional profit sharing and upside to the time charter earnings for the two vessels once the quarter is done.

We assume twelve forty five spot days in the quarter, of which 72% had been booked at an average rate of $48,700 per day. A meaningful improvement when compared to the first quarter. The current market is strong, and we are constructive on the way forward. The spot P and L breakeven for the second quarter is estimated to be $17,500 per day, number you may use to estimate the net income contribution from our spot fleet for the for that quarter. We will now discuss updates to our feeds. As earlier announced and subsequently to the first quarter, we entered into a truly long term time charter and an agreement to sell two older ships. The DHT Appaloosa built 02/2018 has entered into a seven year time charter with a global energy company. Also commonly referred to as an oil major. The contract has a fixed base rate of 41,000 per day plus an index based profit sharing structure calculated on the vessel specification. The vessel in question is an excellent ship and is expected to provide competitive earnings under the pre agreed calculator for the profit sharing. And the index earnings in excess of $41,000 per day will be shared equally between the customer and DHT.

We really like the deal, and it offers long term visibility on base earnings. Thereby protecting the downside whilst retaining upside to the markets. We agreed to sell the DHT Lotus and DHT Peony a combined price of $103,000,000 The vessels were built at Bohai Shipbuilding in 2011 and came into DHT through the BW Fleet acquisition in 2017. The vessels were acquired for a combined price $115,800,000 and has served us well during these eight years. The DHT Lotus was delivered to a new owners during April. And we expect to record a gain of $17,500,000 in the second quarter. The DSP Peony is expected to deliver during July, and we project a record to record a gain of $15,000,000 in the third quarter. The proceeds from the sales will be allocated to general corporate purposes Again, here under investments in vessels and or share buybacks and or prepayment of debt. Here is our fleet employment overview. As per usual, we have a mix of spot and term charter contracts in our portfolio. Currently, total of nine ships on time charter, of which three are coming off during this year, namely DHT Europe, DHT Lion and DHT Harrier. The DHT Puma and the DHT Appaloosa in green color have profit sharing features built into the contracts and so offering a combination of a certain level of earnings visibility without giving away all the upside in the strong markets.

We have meaningful exposure to this rising freight market, both in the spot market and with potential rerating on new time charter contract. Further, we will, as you probably know, expand our fleet with four new and very competitive ships in the first half of twenty twenty six. These ships have gained a total of close to 800 additional earnings days in 2026 compared to when the contracts were entered into. Here, we provide an update on a corporate transaction Subsequent to the quarter, we have acquired the remaining outstanding shares in Goodwood Ship Management for a purchase price of $6,100,000 As a result, DHT now owns 100% of the company. This company is a very important pillar in DHT's business and strategy undertaking the technical management of our ships, including recruitment, employment and training of our seafarers. The company is now fully integrated into DHT, we will continue to develop and build on its excellent safe and operational track record in support of our long term strategy. Now an update on our debt financing. We have entered into a $30,000,000 secured reducing revolving facility with Nordea, being one of our relationship banks. The new loan will refinance the current facility for the DHT Jagger with its current outstanding debt of $25,500,000 The new loan is priced at 175 basis points above sulfur and is a DHT style financing, including a year tenure and a twenty year repayment.

Profile. We reiterate our view that the dynamics of our market is increasingly becoming a favorable supply story.

The rapidly aging fleet exceeding a benign order book for new ships and a string of sanctions making it increasingly challenging to trade ships in the shuttle fleet. The graph updates updates the demographics of the VLCC fleets. Apologize for being repetitive, but we think it's important to reinforce the obvious which is that the VLCC fleet is set to shrink. At the time and demand for our services. Is growing. By the end of twenty twenty six, we estimate four forty one 15 years of age. And 199 to be older than 20. Extraordinarily, we estimate 58 become older than 25 years. All these numbers assume no scrapping. Staggering numbers and in support our markets and business. The order book for new 11% of capacity on order. There will be five ships delivered for the remainder of 2025. 28 are scheduled for 2026, 48 in 2027 and nineteen in 2028. Of the order book, about 20% are being constructed and built in Korea. OPEC has started to bring more of its oil to the markets. Contributing to strengthening freight rates evidenced through new highs for the year and higher lows. We believe OpEx decision to, amongst others, be supported by the following: one, continued oil demand growth two, a temporarily moderating growth trajectory of Atlantic based oil production offering an opportunity for OPEC and Saudi Arabia in particular to regain some market share.

Low crude oil inventories in China requiring refilling to support growth and new refining capacity coming on stream. And lastly, a certain sanctioned oil production being at risk with a possible need for replacement. Our markets have, for the past two and a half years or so, fared better than what most people think. In fact, DHT's average spot market earnings for this period were just shy of $50,000 per day. Dollars 49,300 per day to be precise. Think this is a very handsome number. With the favorable supply backdrop and the constructive oil markets for freight, we believe it's reasonable to expect rewarding times ahead. Or in plain English, be bullish.

We continue 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, namely 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 breakeven levels, a solid balance sheet and a clear capital allocation policy to create long term shareholder value. We appreciate the encouragement. We will stick to our knitting work hard and operate with leading governance standards and a high level of integrity. And with that, we open up for Q and A. Over to you, operator.

Thank you. Star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Frode Morkadel from Clarkson Securities. Please go ahead. Your line is open.

Thank you.

Hi, Swayan. [indiscernible] First off, I guess, on the vessel sales, sold the two only Chinese big ships. I guess that's, not a coincidence. Right? So so maybe you can talk firstly about the decision to do that. And know, how are you thinking about that Korean versus Chinese built ships? That's the first question. And then related to that, I guess, you have a lot of cash coming in, 85,000,000 after debt. And then you list the general corporate purposes and investments is first, share back. Second, prepayment of debt. Third, is that coincidence, or is that actually the the priority as you see it? Now.

So on the first, we felt there was an time now to sort of fine tune our fleet profile. And this is also reflecting discussions with customers, what they would like to see from DHT and they would like to see us positioned going forward. So these two ships, as you said, have been with us for eight years. Bought them only some $10,000,000 12,000,000 above what sold them for now. So it's been a very, very good investment. So in a way, it's also a good opportunity to take some profit off the table. So that's really with that. On the chronology of the three items, apart from cash dividends, that is in no specific order. It depends on the time, the opportunities we can find in the market and so forth. It is, of course, in general, our priority to invest in ships as opposed to invest in in buying our own stock or invest further in the balance sheet, which is already super strong. So but it's not so easy to find opportunities. We are in this market all the time. And if we are able to identify investments, We have ample firepower to do that and can do that without issuing any additional capital in the company.

So time will tell what we can actually deliver on. If you have looked at our historical buybacks, you will note that they are at times when we feel there is a meaningful dislocation in the capital markets when compared to asset values and trajectory of the underlying business. So think at the current market, this is not an area where you should expect us to apply capital.

Okay. That's understood. Thank you.

Thank you. Now move on to our next question. Our next question comes from the line of Jon Chappell from Evercore ISI. Please go ahead. Your line is open.

Thank you. Good afternoon. So in the Appalooza contract really stands out given its duration, but also the structure. Base rate is higher than one of the one year time charters you just did.

Is this a complete one off? Or are you seeing more appetite for extended contracts and more appetite for profit share contracts? It seems to be you know, kind of structure of the past as opposed to the the the present times.

So, you know, we we are very excited about this this contract. We think it's sort of well balanced. And it's an excellent counterparty. It's a meaningful customer of ours, where we have the ambition to expand the relationship, if I can use that word. These contracts are far and few between. I do think it reflects a couple of things. One is that the customer are aligned with our view that the DCC fleet is going into a period where it will be hard to find really good assets from top operators like VHT. So they are concerned about securing, I think, quality tonnage from a quality operator I should not speak for them, but this is sort of our impression. So the fact that you say I alluded to the fact that we can do a base rate, which is quite healthy with the profit sharing. It's also a reflection of the quality of this ship. And the sort of commercial features, consumption and size and all that. So So I think this probably also made good sense for counterparty. And if at all possible to develop more of these, I think we will entertain that. But it's not a ready shelf for these contracts to just to pull out, right?

So So it's a lot of work. It took several months to put this to bed. So So let's see. But in general, DHT is open to similar sort of structures or or contracts if if we are able to develop them.

Mhmm. Okay. That makes sense. Second one, more market related. There's been a lot of optimism about OPEC's seeming shift in strategy. You mentioned it in your prepared remarks as well. Sometimes when OPEC announces an increase in production, it's not really on a one for one basis just given there's some overproduction or certain members can't produce to their quota. Based on what they've announced so far, do you have a rough estimate of how much of that do you think will actually enter the market? The timing as such and the equivalent amount of ELCCs?

That could be added from the last two meetings from OPAC?

I wish I could give you a precise answer, but it's a bit too early to tell. I think at the get go, when the additional barrels came to the market, sort of amounts were quite modest. And we believe that that was probably spread out on existing shipments, lift lifting a little bit more cargo on each keel maybe rather than having additional number of ships loading. So the get point wasn't maybe that visible. And now that sort of the amounts are coming into the 400,000 sort of barrel plus. It's a very different game. And we think coming now from June onwards that we will see see this more clearly in the market. There is, of course, some balancing against [indiscernible] So but it's I think the only people who truly knows this is the insider OPEC and maybe Saudi Saudi Arabia in particular. So we try to make the sense of it. But we do feel that you see that there has been more cargo in the market. Exactly how many, we will have had to look back month after month to see whether it really tallies, right? So and there's probably some shifts there also in the sense that there's maybe more VLCC cargoes and less of some other sectors, although Susan and Air France, in particular, had some spikes as of late as well.

So I think we, you know, we just trust a bit in the sentiment. And the customers are behaving and so that there is real there is more oil in the market.

Our next comes from the line of Greg Lewis from BTIG LLC. Please go ahead. Your line is open.

Yes. Thank you, and good afternoon, and thanks for taking my questions. I guess I was kind of curious You know, it's it's it's not really been impacting know, the crude market, but at least in containership market, we're starting to hear about you know, vessel sailing cancellations and you know, just kinda curious like, as we think about fuel spreads, as as maybe, know, not in tankers, but in some of these other sectors start to see maybe pullbacks in demand. Any kind of view on what that could maybe do to fuel spreads? You when you say fuel spread, you mean between very low sulfur and, heavy Exactly. Yeah. Yeah. The scrubber the scrubber Yeah. Scrubber spread.

Yeah. So, you know, as of late, it's been hovering between, call it, 5,100. Probably, it's been down below 50 at certain times as well. So the spread is thinner compared to when all the sort of scrubber projects were coming on several years ago. And I do think it's also related to weather people are buying heavier fuel oil as a feedstock. As opposed to crude oil. And also, it's a reflection of what the refiners are sort of tuning their stack to deliver. So I'm not a refining expert, but I have a sense that if there's more demand for jet or sort of higher grades, then that sort of tends to widen the spread a bit. And when that's not the case, and we'll have so maybe to the surprise of many, but there's been more diesel demand than what people expected as of late as well. So maybe that has compressed part of this. So I think it's a mix of these things without able to give you a very sort of precise number.

Okay. Great. And and my other one is is a little macro, Ito. It's interesting as you look at like the oil curve, for Brent for forever, it's kind of been in backwardated. And then about thirty days ago, you know, it started to move in contango, you know, not not twenty six, but like in '28 and then really in the last week. You've now seen like oil in contango like a year out Just as you think about you know, you know, what that can do to the to the tanker market realizing that it's only been a couple weeks since this has happened. Any kind of thoughts on if we continue to see this contango curve hold, how that could impact demand for VLCCs? You know, speed of vessels, may maybe storage. It kinda just curious on your views on that, realizing that it's really only happened in the last couple of weeks.

I think typically, if the contango widens, or increases, it could drive some floating storage. But it's just too narrow and there's no sort of room for that activity to happen right now. If that trend becomes stronger and wider, you will see more activity of people know, of course, storing oil. But I shouldn't sort of forecast that for a particular time frame. But that's the typical result [indiscernible] Thank you.

Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Omar Nok from Jefferies. Please go ahead. Your line is open.

Thank you.

Hi, Zvi. Good afternoon.

Couple of kind of bigger picture questions also just more on the macro or or perhaps just the market on VLCCs. You know, obviously, OPEC bringing back volumes and to what extent remains to be seen, as you mentioned. You also talked a little bit about [indiscernible] potential for these OPEC barrels coming to market perhaps because of in part because, say, the there's been a bit of a void. So just wanted to ask as you think about the the the market as we move here over the next several months, into the seasonally softer summer period, you think the OPEC volumes coming in are strong enough to push this market higher?

And you know, offset the potential Atlantic Basin decline?

Yes. Based on sort of the plan that we read is in the cards. We think that could be the case. So we will then potentially have a quite robust summer market, which is not a typical seasonal event. So when I talk about Atlantic, it's, of course, it's mainly U. S. Shale. That sort of is still growing, but at a much smaller level. You're probably it's probably going to be a bit so in steps this because Brazil and Guyana is growing. And we also have quite a lot of new oil coming off the West Coast Of Canada. And almost half of that is going on the OCC to to to the to the Far East. So there are some, you know, still some non OPEC growth around, but it's a little bit sort of it's not the same speed as you had in The U. S. Now for a few years. So do think this created an additional argument for OPEC to say this is an opportunity for us recoup some market share. Guess, Saudi in particular, they have invested in several large and modern refineries in the Far East. So I would think it's in their interest also to ensure that they can deliver feedstock to these and not sort of have a competition with other suppliers.

Yep. Yeah. That thanks. Fine. And and I guess, you know, part of the the bullish thesis for VLCCs this year has been the sanctioning of so many ships. And the tightening of that capacity, especially as it's been primarily due to the moving Iranian barrels. How do you think this market kind of how does this market shake out, for instance, if know, The US and Iran reach a a long term agreement and Iran's volumes are maybe welcome back into the open market, How do you think the VLCC market reacts to that?

That's a good a good question. So so we look at this sort of two call it, broad scenarios. And one is, as you alluded to, that there is an agreement in place with Iran and The U. S. And sanctions are lifted. And that means that Iran can access the compliant market for freight. Which is cheaper per barrel to transport than in the shadow of the sanction market. So I think that those barrels will quite quickly then move on to to the compliant fleet. As we've seen in prior periods when sanctions have been lifted. So I think that is truly it's only positive for these. I think, strangely, if it's sort of the other way around that there's no deal and there's maximum pressure being applied on Iran, And Iranian production is being driven down to the floor. It means that somebody else will have to step in and supply them that loss. And that will very likely be the other Middle Eastern producers, maybe especially Saudi and U. So I do think both of those scenarios are actually positive for the VLCC business. [indiscernible] Russian oil is being sold below the price cap. So that means that they can access the market for ships without sort of bordering too much about sanctions.

But that is not the VLCC business. That is Aframaxes and Suezmaxes and much shorter hauls. So that has a very limited impact we would like to think compared to the Iranian story.

Okay. That that's very clear. Thank you, Slyne.

Thank you.

There are no further questions at this time, so I'll hand the call back to Svein for closing remarks.

So thank you very much to all for listening in and following DHT. It's most appreciated and we're wishing you all a good day ahead.

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