Q1 2021 DHT Holdings Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 DHT Holdings earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation that will be a question and answer session to ask a question during this session.

You need to press star one on your telephone please be advised that today's conference is being recorded today. If you require your and your further assistance. Please press star zero and we've watched a day, we have co Ceos Svein, Mark Smith, Hartfield and tweak the Manta and C F O.

And Laila Halvorsen I'll now like to hand, the conference over to your first and speakers today Laila Halvorsen. Please go ahead.

Thank you.

Good morning, and good afternoon, everyone welcome and thank you for joining DHT holdings first quarter 'twenty to 'twenty one earnings call on.

I'm joined by and DHT co CEO, and Mark Smith, Hudson and taken them and stuff and we.

And I'm seeing this type of Investor relations.

And the issue we will go through financials and on some highlights before we open up for your questions.

The link to the slide deck can be found on our website DHT, Chris Dot com.

Before we get started with today's call and I would like to make the following remarks.

Play on this conference call will be available on our website DHT, Chris Dot com until May 12.

In addition, our earnings press release will be available on our website and on the associate Edgar system on unacceptable to our form 6K.

As a reminder, on this conference call and we'll discuss matters that are forward looking and nature.

Forward looking statements are based on our current expectations about future events, including Dht's prospects.

And then share repurchase and pre.

Pamer.

And the outlook for the tanker market and general Danish Ultra high rates on vessel utilization for our costs on good economic activity.

Prices and oil trading patterns anticipated level of and you're building and scrapping and projected dry dock schedules.

Actual results may differ materially from the expectations reflected in these forward looking statements.

And you have to read our periodic reports available on our website and on that.

The CES per system, including the risk factors and these reports for more information regarding risks that we face.

Okay.

And looking at the P&L highlights DHT showed profitable results for the first quarter. Despite a very tough time to market.

EBITDA for the quarter came in at $46 7 million and on a net income of $11 6 million or seven cents per share.

Adjusted for non cash gain in fair value related to interest rate derivatives of $3 4 million net income would be $8 2 million or five cents per share for the quarter.

Opex for the quarter was $19 1 million and G&A per the quarter was five 6 million.

Moving over to the balance sheet, the culture, and then with $54 million on cash.

We have built a very strong balance sheet and financial leverage and it's about 35% based on market volumes for the ships.

Net debt to per vessel, its 18 million at quarter end, which is below current scrap volume.

Okay.

Looking at the cash bridge.

And the quarter started with $6 million to $9 million on cash on which generated 47 million and EBITDA.

Ordinary debt repayments and cash interest amounted to $6 million.

9 million was paid and dividend.

125 million was drawn on our Rcs, while hunters and 36 million was used for industrial applications, and 5 million and what's used for maintenance capex.

Changes in working capital amounted to total 1 million on the quarter ended with $54 million of cash.

And now over to capital allocation for the first quarter of 2020 wrong, DHT will pay a dividend of <unk> per share on may the 26th to shareholders on record as of May and 19.

This will be the 46th consecutive quarterly dividend payment.

With nice and I will turn the call over to Simon.

Thank you and Arnaud.

We will now discuss our latest investments and diverse.

And as long as our thoughts going forward.

During the first quarter, we acquired two scrubber fitted and <unk> 16, built Vlccs book, which now have delivered into the DHT fleets.

We consider these to be attractive investments and robust required rates to generate good returns for our shareholders.

The DHT approach is amongst others to compare the required rate to generate and unlevered return of 10%.

And compare that with average historical VLCC earnings.

The ships, we bought requires on 33000 and several of those per day for the remaining economic life to generate this return.

Comparing favorably to the historical average of 42 and a half thousand oil per day.

During this quarter, we entered into three individual agreements to sell our oldest ships all built in 2004.

The DHT Raven has been delivered to her and the wellness.

What is the DHT Lake and DHT Condor are expected to deliver during the balance on this quarter.

The three ships were sold for an aggregate total of $89 million.

Net proceeds from the states after repayments on our mortgage debt is.

And make it to be about 78 million and we expect to book a profit of about 15 million during the second quarter.

The industry and newspaper trade winds quoted on industry Observer questioning why we did not sell these three ships a year ago.

Little most desktop server and low about our business.

Back in the first quarter of last year, we told you that create more value for our shareholders by trading the ships for a while longer taking advantage of the strong market unrelated to time charter opportunities.

The leading ship broker clarksons value that 15 year old tanker at $35 million and on the first quarter last year, suggesting that the 16 year old ships, where at the time with a bit on the low thirties.

Now these three ships have over the past five quarters generated a cumulative EBITDA of $57 million.

The numbers speak for themselves.

The transactions represent a fleet renewal and then average age being reduced from $9 four to eight two years.

It will further improve the operational efficiency of our fleet, including metrics, such as <unk> and E on.

Moving on and we are interested and making additional acquisitions and have the capacity and invest to invest without relying on additional equity or stressing a really healthy balance sheets.

Our focus is still a modern secondhand ships of eco design and build from 2016 alone.

However, and values or at least sellers Austin and prices have moved up a bit quicker than we had hoped leaving us in a wait and see mode mode for now.

Okay.

And you should not expect us to contract new buildings and for three key reasons.

Well.

And there is great uncertainty related to what will be the fuel of the future for large tankers.

You don't think there's any and all pitched in be in being an early mover.

Two.

New moving prices are not compelling.

New building prices for visa Europe from roughly 83 million from six months ago to about $92 million today.

They might as well continues to increase from here and offer a single good sector and a year's time.

Cheap as per now behind us.

And at DHT, and we do not invest and ships to try to make our book by selling the assets and the short term.

We invested and you to make good returns by operating the ships.

And it's the oldest simplicity and if you buy well, you'll never have to sell whereas and expensive shipped will always be inexpensive ship.

And the third reason our sector does not need any more ships.

Whereas the fleet demographics looks favorable for the next few years, adding to the order book could easily mute told otherwise looks to be a rewarding recovery.

Yes.

Okay.

Now on to fleet employments.

We are still enjoying the decisions, we made last year and securing some fixed income per our fleets.

The second and third quarter, Hasnt, even distribution between spot and fixed whereas the fixed portion is reducing to a quarter of our capacity in the fourth quarter.

As such the coverage ratio is gradually coming off as we move closer to a recovery and fragrance.

For the second quarter, we have booked 75% of our total capacity of $21300 per day being available on a cash breakeven numbers, which trigger will discuss in more detail later on.

Okay.

During the fourth quarter last year, we continued to take advantage of the lead freight markets, where the volume start ups.

We have seven ships in Drydock during the first quarter with a total of 232 days off hire.

For the second quarter, we will have another three ships in drydock with between 90 and 110 days off our expected.

Keep in mind that the COVID-19 situation impact these drydocks and correct and the issues, causing delays and being included in these numbers.

We plan to Drydock and other three ships during the second half will be here.

And some comments on the COVID-19 situation.

This situation has been and still is a major challenge for the industry.

With crew changes being the dominant program.

We have under the circumstances fared well, thanks to a fantastic support and understanding from our cruise and <unk>.

Hard work from all the support staff on shore.

There has been a positive trend over the past few months, but this is now book the setback with the developments in particular, and India, causing them and the use of challenges.

Seafarers are yet to be identified as essential workers by the authorities and.

And with electrical global and coordinated support from authorities and politicians and we've said we expect difficult this sort of rate.

We will continue to act responsibly and do what we can to make do during these challenging price and with.

And Thats all water treatment.

And so far.

Following the acquisition of the two 2016 built Vlccs, we have developed a new credit facility together with no day as agent and six other core DHT banks.

Hello, and has built up by three blocks.

Firstly it is a 75 million new mortgage financing of our two recent acquisitions.

This will be DHT style, with a 20 year repayment profile and $2 5 million and annual repayment per ship.

Secondly, it is an extension of the 181 million loan that we currently referred to as and Nordea facility.

From April 2023 to January 2027.

And thirdly, it has a new undrawn revolving credit facility of $60 million.

The total amount available to us is $316 million.

The loans will have a five and three quarter year tenor and will come to final maturity and early 2027 and.

And it will carry an interest rate of LIBOR plus one 9%.

This is a 50 basis point reduction from the current margin.

The covenants will be unchanged from the current facility.

Further as previously reported we have prepaid all regular installments for this year and next year under the existing or their facility.

And you should note that this will remain so also after the extension.

And finally, the new facility includes an uncommitted accordion of $250 million.

The main point here is to facilitate the smooth mortgage financing and.

Any additional acquisitions that we made that may be made between now and the end of next year.

On this slide we will walk you through the main financial effects of the new financing and the ship sales to try and discussed.

The new financing will boost liquidity by about $132 million.

That is the new mortgage on the Osprey and Harrier.

Plus the new revolver.

And this front entry.

Liquidity will be further boosted by the net proceeds from the ship sales of about $78 million.

So as you can see liquidity will grow from 99 million net quarter and $2 million to $309 million. Once the ships have been delivered and the new loans.

On the new loan and executed all else being equal of course.

Interest bearing debt will be reduced by 9 million following the repayment of a loan on one of the ships sold the.

The other two ships were debt free.

And finally book equity will increase by $15 million from the profit on the ship sales.

So the main benefits of the sale and purchase and financing activities can be summarized as follows.

One where book to two five year old Eco ships and sold $3 17 year old ships.

This is fleet renewal and future efficiency improvements.

Two.

And reduced margin on the new loan equates to sell and one 6 million and annual savings assuming the low on is fully drawn.

Three we have pushed out the final maturity on one of our large credit facilities to 2027 with.

With the effect that we have no refinancing requirements before 2024.

And for our financial position has improved.

Net debt per ship this reduced to $16 6 million per ship.

And total liquidity and that is cash and revolver availability is increased.

$309 million.

Let me then take you through where we currently are in terms of cash breakeven levels.

On the left side of this slide you see expected cash costs for the current quarter.

Broken down into Opex cash interest debt repayments cash G&A and maintenance Capex.

And so about $38 million.

In order to generate the same amount and revenues the ships need to earn an average of about 15900, a day as shown on the Orange bar and the middle.

This is in and of itself very competitive compared to peers.

However, we do also have significant fixed income from our time charter book for the quarter. So the spot ships only need to earn some 6700 per day in order for DHT to cover all its expected cash costs for the quarter.

On the right side of this slide you see a similar graph for the second half of the year.

Not a dramatically different picture, but you will note that that the somewhat lower time charter cover means that the spot ships need to earn roughly 10200 per day and the second half of this year and order for DHT to be cash neutral for the period.

So before we open up for your questions. Let us provide you a brief summary of where we are.

We're very pleased with our performance in the first quarter, while our colleagues on border ships as well as the shore have delivered good results and a difficult environment, both because of COVID-19 and the historically low freight market.

Despite the challenging market, we have built the NAV for our shareholders both through earnings from operations and through gains on sale of older vessels, Although the latter will only be recorded and the second quarter.

Our buying and modern eco ships and selling of older ships have not only reduced the average age of our fleet and will importantly, also improve our efficiency ratios.

Our new bank financing shows that we enjoy great support from the world's leading shipping banks.

And we're pleased to see that our past performance has enabled reduced financing cost, which in turn will lead to increased equity returns going forward all else being equal.

Our financial position remains very healthy with low leverage and ample liquidity.

And our spot cash breakeven remains very robust.

And finally, we are bullish on the medium term and.

Market outlook.

According to energy aspect global oil demand is estimated to increase by 10 million barrels from the second quarter last year to the second quarter. This year.

However, this growth has not yet been.

Has not yet been felt and the tanker market and so a lot of supply has come from inventories.

At the peak global oil inventories were some 800 million barrels above normal but have since come down to 120, or so and is still declining.

We have now reached a point when OPEC plus will start releasing more supply into the market.

But we do not expect that the first baby steps will send spot rates skyhigh right off the bat.

We believe it will take a little more than the initial 700000 barrels per day.

And to make an impact.

But we do believe the worst is behind us and that we are about to start on the gradual recovery that should lead us to a better tanker market and and up to this and future.

And with that we'd like to open up for your questions.

Operator.

Thanks, Ladies and gentlemen, well now begin the question and answer session. As a reminder, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to accounts. So your request. Please press the husky and once again press star one if you wish to ask.

A quick question and.

And your first question comes from the line of Jon Chappell Evercore.

Ask a question.

Thank you good morning, good afternoon everybody.

If I can start with a quick housekeeping item.

Second quarter to date number that you gave.

This includes time charters can you give us the second quarter to date spot fixtures, both on a dollar per day and on a percentage coverage basis. Please.

Yes.

Yes.

And where spot bookings for Q2 and 61%.

600 per day.

Perfect. Thank you.

So I'm intrigued.

Strategically you laid out a bunch of things here. So the liquidity is obviously vastly important to your strategy going forward and the fleet renewal makes all the sites and the world. It seems that given the choppiness and the market today, maybe the move and asset values and some of the S&P activity. That's happened and the market is maybe getting a little bit ahead of itself. So how.

Do you kind of time.

The market bottom and the worst that can get type of rate environment today.

And with trying to align that with asset values that have moved up and and being.

Well timed and putting that liquidity to work versus maybe just sitting back a little bit waiting for some of the optimism to come out of the market.

And be opportunistic at some point and the future.

We have already had on something and that we will.

We remain disciplined industrial with our and also patient and.

And.

We certainly keen to do something more and if you sort of get.

A little correction and the expectations of assets out is it like you alluded to here and we're certainly ready to strike. So so we are holding a lot of things and.

And.

If it's <unk>.

And our sort of map ahead, and we'd like to add some more and more ships to the fleet at this at this time.

And but disciplined and patient is key here.

Yes that makes sense, but just to your point about if we get a little correction. So it feels like and the tanker sector, especially theres, maybe more optimism that's been at least proven and the market today and I get it oil demand is coming back opex, increasing production and the order book slow it's understandable, but what if there's a scenario where.

And we start to see some more oil come to the market the rates start to come up just a little bit and then the asset values are off to the races. So basically what I'm, saying is is now the sweet spot.

Or do you have maybe some of your relationships and view that things have gotten a little overheated and there may be a temporary pullback and that's when you can be opportunistic.

I think I said.

Addressed and in the prepared remarks.

Our remarks is that we're getting to a point now, especially on the modern and the curve to values, where it to us becomes difficult to actually invest.

As we've said all along and we want to invest at levels, where the required rate to generate 10% on levered is meaningfully below the historic numbers, and if you say and resale and the low ninety's.

Isn't meaningfully below historic averages.

We're not really there to four accounts.

And these kind of numbers at least and the current environment.

And.

And then also those full calculation if you if you compare say on new holding non quota that 92.

The acquisition that we just made and the first quarter.

The required rate differential is $5000 per day and the.

MTV that over the remaining life of the ship is a lot of momentum.

And we wanted to be really careful and with the capital that we've been interested so I would say disciplined.

Yes, that's completely what I was getting at alright. Thank you trigger thank you Simon.

Thank you and your next question comes from the line of Brian <unk> from Jefferies.

Please ask a question.

Okay.

Howdy stand and sugar and Laila good morning, How's it going.

And we're doing well thanks.

Alright, we are first and foremost obviously good commentary there on the reasons against new buildings makes sense and good call on pulling forward the dry dockings.

And I guess with that you sold the three vessels $7 million to $8 million and net proceeds.

I guess following up on the earlier question what are your kind of plans for the proceeds of these vessels.

Do you plan on just further repaying debt and may be prepaying, your 2022 kind of and more like you did 21, or just kind of keeping and on cash and looking for those accretive acquisitions here and the near term.

I think for now these cash flow would be and our liquidity basket, so to say and.

We are in no rush to make decisions on additional debt prepayments.

For the future as you know, we voted and made meaningful debt prepayments for this year and next year and.

Sales of discussed with Joan and.

We want to be ready.

And the other growth opportunities for us and saw sort of flow the cash will be liquidity and give us ample flexibility to make that decision later on.

Got it.

Alright, and then when it comes to DHT, obviously, a very straightforward capital allocation policy.

Pretty simple fleet to follow up here, So I guess a market question for you.

And you say you mentioned, you mentioned and you're pretty bullish here on the kind of mid term near term market is that all driven by just OPEC increasing production is at looking at inventory levels and what kind of timing are you seeing for rates to really inflect, meaning getting back to $30 $40000 a day.

We think it's there and.

And it starts with the inventory levels. So OPEC plus is expressed the desire to bring those back to normal or whatever they did find that us and as we mentioned in our prepared remarks and is being made great headway on that over the past several months.

So we're now getting to the point, where they are going to start to drip feed more cargos into the markets.

So we think that will be the start of the recovery, but as we also said.

700000 barrels a day is not really going to move the needle and a big way.

But.

We expect more to come and we do see.

And quite impressive rebound in the global consumption figures so as really.

This is still trailing the 2019 levels, but.

COVID-19 news of course with the exceptions from.

And the eye and so forth. It is relatively good news and we see that people are getting back to past consumption patterns. So we think the fundamentals are good.

But as we've said so many times, we've been and this business too long to give you an exact.

On a week when we think that we're going to see 30000, a day, but we see.

Everything aligning are lining up to give us confidence that we do expect it to healthy and tanker market and and not too distant future. So call that next winter or so.

But we.

Threats that we see a healthy market and.

And we're not thinking that we're seeing.

On a fantastic tanker market like we saw and.

Fourth quarter and 19 first quarter.

And first half of last year, but the numbers well north of.

What we need to produce meaningful profit.

Okay, Yeah, that's fair volatile summer with a kind of profitable back half if not <unk>.

Good day on the Chinese somebody is very volatile I think it is going to be depressed for a little while longer but they were starting slowly to regain some territory.

And <unk> engine and foot by foot.

Okay.

And that makes sense. Thanks again.

Thank you and your next question comes from the line of Chris sung from Webber Research. Please ask your question.

Hi, good morning, and good afternoon, and how are you guys.

And well thank you.

Great. Thanks, I wanted to just kind of touch on your.

Fleet renewal.

So purchasing VLC spot two second Bill 2015 built vlccs.

L three and.

And it took the average age outs it back in April guidance.

In the quarter year zone.

You guys currently still have about seven vessels that are roughly 14 years old and I know for on time charter, but I guess, taking the math that you guys are just.

Explaining in your prepared remarks with why didn't you guys sell the vessels a year ago and day rate.

Positive cash flow and and just.

Kind of what $56 million.

In the past year.

Given the current market.

Operating costs.

And spot rates are where they are.

If they are actually.

And our negative if you will alright, and the mat and giving us a net.

Present value breakeven.

You kind of would be incentivized to kind of sell now so I guess the question is are you.

Are you guys thinking about possibly.

Pursuing this and selling those older vessels at this time to show up additional cash and liquidity for wind and the markets are a little bit more on your favor and the timing is right.

Purchase more segment and Bill chips.

So we have ample liquidity and now with this sort of actions too.

And.

This share this industry overshoots on in both directions right. So of course now is the addressable market.

The optionality.

Vintages that you referred to and a significant they're all good quality ships.

And at the table to scrubbers on board. So they certainly have an opportunity to dance.

And another sort of recovery and generate earnings for our shareholders assets, we are prudent and the Pos. So so we have no intention to sell additional ships this side of the recovery.

Okay, Alright, Thats fair and I guess, maybe just on slide 14, with the cash breakeven levels.

I just wanted to confirm is this before or after the.

Refinancing and the credit facility.

This is before the refinancing.

Before so it kind of come down and breaking lifts come down slightly because.

Thanks.

Interest rates.

50 basis points lower.

That's correct.

Okay. Thank you that's helpful.

Good luck.

Thank you and your next question comes from the line of Omar and locked up from Clarksons Plateau Securities. Please ask your question.

Hi, there thank you.

Maybe just following up on the previous discussion points.

And I'm pretty clear about new buildings and prices and on secondhand market and.

I understand the need to pause the acquisitions to just sort of reassess and get a sense for how things are but we.

We have seen steel prices move quite a bit higher and thats clearly boosting new building cost and there is at least some relationship with steel and secondhand values.

My question is on what happens if value is just don't come down, but they just continue on the upward trajectory and even though we're not seeing rates justifying it today.

Had this inflationary pressure on the asset value.

Is that a concern that you might miss the boat here or.

Or is it maybe for you to on pause is it as simple as just waiting for rates to move up and any sort of.

And any concern that you might be missing and if you just keep pushing higher.

I think for the first part of your question Omar.

Steel prices continue to rise forever will and clearly we should have more ships at this point in time, but we think that the steel market is and <unk>.

Cyclical is as everything else that we do and shipping so.

So we're not convinced that it is off to a one way trajectory upwards, but again if it if that was the case and we should have it on more but.

I think those were the kind of arguments that drove this market office inches.

On 10, 15 years ago, when people were contracting new ships for $150 million per VLCC, because they thought it was different this time and.

They regretted that three years afterwards.

So we would like to err on the on.

On the conservative or sales side or whatever you want to call it and I just want to also stress that if.

If we do not.

Wire additional ships at this trough.

And that's not a disaster, we got 26, great shifts that are ready to earn a lot of money into the net debt next upcycle ideally we would like to added a few more units, but it is not really the entire bad news if we failed to find.

Good investment opportunities between now and the real upcycle.

Yes.

On 26 ships, you've got significant critical on that and maybe just on that point, because you don't want to sell vessels on this side of the cycle and violence.

Just mentioned a few minutes ago.

What do you think about the approach.

Seeking to expand the fleet charter and I know you haven't done that and years that maybe there is an opportunity here given the low rate structure currently DC.

And the potential or are you interested and going out and then.

Leasing and vessels over the medium term periods, where you're not committing yourself for the life of the vessel that you're at least getting some extra capacity and.

Considering that asset values have been a bit higher than you'd like.

You may call us boring, but we and it's got to be the same answer as before we don't see and need to add tremendous operational leverage to it in the form on chartering in ships. So no. We're not planning to do that and you Shouldnt expect it.

That's pretty clear Thanks, and then just final final question just on the new credit facility.

Could you, maybe just explain how that $250 million.

Uncommitted accordion feature works and that facility.

Sure.

And if we were to finance a repeat of the deal we did and we come with two five year olds and we'd like to have DHT style mortgages on those ships.

Then we would go to the banks and the syndicate, the seven of them and.

And they would.

And I'll say EBITDA RNA and if enough people said, yes, then all the documentation is done and it will just become a new tranche within.

On the current loan agreement and the facility.

Okay, and so that would be for that DHT style financing that basically seeking and LTV of around 50%.

Something like that.

Bigger.

It is $2 5 million times, the remaining economic life four years of economic life. So for a five year old is 15 times to 537 5 million, that's what we called DHT style.

And the balance to be at that so if we for some reason and wanted to borrow a little more or little less that can certainly be done.

But it would be the point is that you will just create a new tranche within the same legal framework that we have now established for.

And also the benefits of this being an accordion and the ways that if we had a sort of a hunting license.

And you'll have to pay commission and fee rates. So so we don't really keen to have those expenses running and.

We feel that we have significant support from our banking universe and that there will be therefore additional investments should we identify them and.

And in that context, you should also note that the 316 million and was significantly oversubscribed.

Okay, that's great alright, well, thanks, guys I'll leave it at that.

Thank you.

Your next question comes from the line, the Mark and austere from H C. Wainwright. Please ask your question.

Yeah, good afternoon guys.

Couple of questions here.

And you guys have done a great job and.

Staying profitable through this challenging market and it looks like <unk>.

On the bar for staying cash flow breakeven is relatively low at $6700.

You also said that you think the worst is behind what.

Do you think that the first half of <unk> was the low or do you think the second half of <unk> will be the low for the spot rates I mean, the market is really choppy here. So.

And I appreciate some color.

That would be a very precise assistant.

So we're already and a very low market and the first half of this year. So we're looking at the history.

The worse.

Business has seen for more than 30 years. So so exactly whether the first two weeks of the second half of May or June is going to dealers and both of them, it's hard to say that.

Yeah.

Based on talks about a little bit more oil coming to the market maybe low rates earnings move up a couple of thousand 5000 book.

It's sort of on.

Already and they're very low environment. So we're not that precise on exactly when things will start to improve and you should also remember that.

<unk> here and Thats, what you read and the fixture and reports Israeli cargoes that are going to be loaded a couple of weeks from now so.

Yes, we now see and spot rates.

Come up and little bit and.

Most of those cargoes are going to be showing up towards the end of the quarter and into the next really.

So I mean with OPEC start increasing second half do you think are at least two <unk> will be the low for the market.

I think that's a fair guess what keyword.

Yes.

On a different note.

Looking at the.

Energy transition here and.

Look and what the oil companies are doing have you seen the attitude changed at all and <unk>.

With major oil company as far as chartering ships.

More fuel efficient ships I mean, you guys are well positioned to benefit from that and I'm just curious if you've seen any.

Any changes there and theyre planning for for the future.

And the current rate environment pretty much all charterers are focusing on eco ships with scrubbers and thats.

And that they will but that's also a reflection of the fact that and this market. They do have a choice so don't forget that.

And as a strong market and of course charters tend to be a bit more flexible as to what their peak.

There's been a couple of other projects.

Two majors that have secured some vlccs for long term charters with the LNG or dual fuel.

But so far.

On the two projects.

And our view, it's because it's not so.

And then easier to predict really what will be the fuel for the future for large tankers.

If you're on.

If you're already refined the refinery owner say and Korea, and new buyers and 75% fully accrued and AG and maybe you would like to have and LNG ship shuttling back and forth.

But you probably need to them. It takes some of the capex risk.

And so.

So far these charges a bit and adult are five to seven years, and the ship owners and and.

And offered a meaningful residual value on this equipment.

And.

And I don't think there is that many owners actually came to do them and we don't see a big inflows or end users won't make to do them either I think and most of these guys are also and assembled accounts with us and then.

And then.

There's still a lot of uncertainty out there and it's hard to sort of decide what to do.

Alright, so I mean your time charters are.

And just coming up.

<unk> 2021, so based on your comment kind of on.

And that 10% Unlevered return on it and then.

And Thats out there right now so should we expect you know.

Very little time charter fixture activity and at these levels, we need to get into higher rate environment correct.

We don't takes time charters.

It will to required rates earned 10 presents and lever and we look at the time charter rates, what are sort of meaningful numbers on where we are and the cycle and obviously last year and the <unk>.

And for ships out.

Fantastic rates.

He said the addition, because the nominal numbers. It is in itself is so strong.

So that will issue a decision in this market. We are also keen to fix our ships longer and so we've done some.

Short term charters six months nine loans total loans as the premiums we've been able to achieve for those are available. This book markets, but thats more of a short term decision, making and all of them, saying they are going to make a specific return on investments.

Alright, very good thanks, that's all on that.

Thank you and your next question comes from the line of Robert Silvera from Marine Surveyors. Please go ahead. Your line is open.

Thank you and span and shrink.

With me.

I appreciate very much you.

And have given us a picture future.

One thing you have not spoken about is what do you see with the low rate environment now.

For scrapping rates.

And reduction of overall fleet.

And the scrapping prices have certainly moved up but the key reason for that is the correlation to steel prices. So today and they're very high Florida, that's maybe even above 504 are somewhat smaller tankers.

So that's at a very healthy numbers and these.

A lot of the old fleet is today engaged and trades that are sort of a sensitive nature and.

And barcode.

Oil et cetera, and there.

We're getting paid quite handsomely.

Freight that's on there.

Oil is discounts and so sort of the economics work for the both the seller and the buyer of the oil.

We think that if some of these sanctions are lifted.

And you would very likely that and get a more normalized pricing dynamic.

On the oil side and that means they cannot.

And for to pay these fantastic freights that he sold ships need so suddenly leave these old ships without employment to a large degree and then the option a and b to start to scrap so.

So it's a little bit of industry.

On whether these sanctions being lifted on what we think at least and the short term so.

Okay.

Okay.

Now.

Im looking at the reconciliation of adjusted net income chart.

Were you present shipping revenues.

Voyage expenses.

And there is no direct correlation and apparently between shipping revenues and voyage expenses.

For instance quarter for 2020, and shipping revenues were about $91 million, but voyage expenses were down and $13 million than in quarter. One we went down to about $87 million on shipping revenues, but we went up over $2 million on voyage expense.

Can you give me some color on why that kind of relationship flips.

During this last.

Two quarters.

Are you referring to the table.

Net.

And so on.

Slide on page.

Hi.

I don't know what page it's on there I'm looking at it on the statement that you made the press release and all the charts and things like that.

Okay.

And all.

It's the.

And you go all the way to 2019 2020, and then you break it down quarter by quarter and 2020, So you get to the last one which was quarter one and 2021.

And so.

Sometimes when sales go down on.

Obviously voyage expenses have gone down too.

Tom and shipping revenues have gone down, but then another time shipping revenues go on.

Up or down rather and expenses went up which is.

Kind of contrary.

From quarter to quarter.

And I'm, just wondering why that that kind of relationship doesn't stay consistent shipping revenues relation on any two voyage expenses.

And it depends on how many vessels we have on time charter for instance.

On the spot market.

And when it comes to voyage expenses.

Keeping our eye on it.

<unk> impacted.

And the market.

The table is to me and a reconciliation of non-GAAP.

Numbers and.

And also a reconciliation.

Adjusted.

Yes.

And on time soft drink on that one.

But the key point here is that when you put the ship out on time charter, we don't have any wage related expenses. So the charterer pays for all port fees and bunkers and so forth.

And that's when you are on the spot market.

We put those built ourselves. So that's the main driver for the sort of lack of harmony and the development on those numbers that you referred to.

Okay.

So, it's reflecting really how much you have and the spot market versus the charter market.

Okay, and that makes and understandable for me and Thats the variations.

You mentioned before that you were amortizing these new ships over 20 years, even though they're already on <unk>.

Five years old.

Are you amortizing them on a rate to go to zero or two and estimated scrap value with the and.

Alright on the testing until our scrap volume that were amortizing over.

And you mentioned initially by foreign on five year on rental and 15 years remaining life.

So.

Total estimated on the last 20 years and.

And then we amortize throughout the remaining.

Down to zero value or down two and estimated scrap value.

Duncan estimated scrap volume.

Okay. Good.

That's all I have and I compliment you guys for year and incredibly disciplined approach.

I think you have proven over the years that you know.

And what Youre doing and you know how to read the cycles, very well and I am a very contented. Our company is very contented shareholders over the last six years. Thank you.

Thank you very much.

Thank you as a reminder, if you wish to ask a question. Please press star one and I will tell my phone and at least two accounts to your request. Please press husky and once again. Please press star one if you wish to ask a question and your next question comes from the line of George Berman from CL Securities.

Please ask your question.

Good morning, gentlemen, and good afternoon, and thanks very much for taking my call.

Good morning, and good afternoon.

And.

And congratulations.

And all the other caller said I think it's a very good quarter I think you know one on a few companies and when you sell.

<unk>.

And you actually book a profit I think that has to do with your amortization of 20 years versus and I think the industry.

It is about 25 <unk> on that looks very good.

You had mentioned in your initial wording that.

You failed weights on prices for used on existing ships were little high no building out of the question is because of the higher steel prices I'm wondering.

With very strong liquidity position.

Is one way to I guess indirectly acquire ships as if you were to go in and buy a slug of your stock back.

It seems to me that.

And you haven't gotten any accolades and the stock market and valuation for your shares we issued additional shares last year and through the conversion of the convertible preferred share and the convertible debentures.

And.

And.

If you're looking if you're faced with the question of am I going to pay too much for used on new ship here versus essentially and directly buying my own shares or buying my own stock at these very low levels.

Does that makes sense have you thought.

About it in this context.

It's a good question. So we have that total tool and the toolbox if you like.

And we've done this and the pulse, but the key is to US and this is that there has to be meaningful dislocation between our pricing.

And the stock market versus underlying values, and where we are and the cycle. So last time, we did this.

It was a meaningful dislocation so the stock market force trading.

Trading horribly web and.

And then we resolved and so just the beginning August saw trajectory over and over.

Market and improvement that first of all closer and time more circling to about it and we decided and to deploy some capital to buy back some stock. So so we've done it in the past so total.

And again, it's one tool and the toolbox, but it's not something we typically standard that is an alternative domestic and buy ships, although logic as you say sort of the same thing.

Yeah.

Okay, well I hope that we're going to see weights increase a little bit further here.

And we do feel that the oil market and its been balancing quite well and the demand at least for the.

Regular gasoline.

Demand is higher and hopefully the airlines will follow.

And we look forward to.

More profitable future for all of us going forward. Thank you.

There are no further questions at this time please continue.

So we just wanted to say thank you to everyone for listening in and showing your interest and DHT, Thanks and have a good day everyone.

Yes.

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Okay.

And.

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Yes.

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