Q1 2024 DHT Holdings Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the DHT Holdings Inc. Earnings Conference Call for Q1 2024.
Yes.
Speaker Change: Good day and thank you for standing by welcome to the Q1 'twenty 'twenty four DHT Holdings, Inc Earnings Conference call.
Operator: 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 and 1 on your telephone. You will then hear an automated message containing your hand-written phrase. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Laila Halvorsen, CFO. Please go ahead.
Speaker Change: Time will participants in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: Good question during the session you will need to press star one and one on your telephone you will then have an automated message devising a hard to trace it.
Speaker Change: Your question. Please press star one and once again it would be.
Speaker Change: Advised that today's conference is being recorded.
Speaker Change: I'd now like to hand, the conference that you speak of today.
Speaker Change: Since yesterday. Please go ahead.
Speaker Change: Yeah.
Laila C. Halvorsen: Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' first quarter 2024 earnings call. I am joined by DHT's President and CEO, Svein Moksnes Harfjeld. As usual, we will go through the financials and some highlights before we open up for your questions. The links to the slide deck can be found on our website, dhtankreeds.com.
Kim: Thank you Kim.
Speaker Change: Good morning, and good afternoon, everyone welcome and thank you for joining DHT Holdings first quarter 2024 earnings call.
Speaker Change: I'm joined by Dht's, President and CEO.
Speaker Change: As usual, we will go through financial highlights before we open up for your questions.
Speaker Change: The link to the slide deck can be found on our website.
Speaker Change: Dot com.
Laila C. Halvorsen: 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 May 22nd. In addition, our earnings press release will be available on our website and on the SEC EDGAR system, which is a bit similar to our Form 6K.
Speaker Change: Before we get started with todays call I would like to make the following remarks.
Speaker Change: A replay of this conference call will be available.
Chris: Thank you Chris Dot com.
Chris: On may 22nd.
Chris: In addition, our earnings press release will be available on our website.
Chris: The Edgar system.
Speaker Change: Just a bit to our form 6K.
Laila C. Halvorsen: 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 in the SSE ecosystem, including the risk factors in those reports, for more information regarding the risks that we face.
Speaker Change: That's a reminder, on this conference call, we will discuss matters that are forward looking in nature.
Speaker Change: These forward looking statements are based on our current expectations about future events that are detailed in our financial reports.
Speaker Change: 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 core system.
Speaker Change: System, including the risk factors in these reports for more information regarding risks that we face.
Laila C. Halvorsen: We will start the presentation with some financial highlights. We maintain a very strong balance sheet represented by low leverage and significant liquidity. At quarter-end, financial leverage was 17.8% based on market values for the ships, and net debt was $13.5 million per vessel. The first quarter ended with total liquidity of $289 million, consisting of $73 million in cash and $216 million available under our Volume Credit Facility. Now over to the P&L.
Speaker Change: I will start the presentation with some financial highlights.
Speaker Change: We maintain a very strong balance sheets represented by normal leverage and significant liquidity.
Speaker Change: At quarter end financial leverage was 17, 8% based on market values for the ships.
Speaker Change: Well certainly on a half a million per vessel.
Speaker Change: The first quarter ended with total liquidity of 280.
Speaker Change: Eight to 9 million.
Speaker Change: Sounds good 3 million in cash and $260 million available under our revolving credit facility.
Laila C. Halvorsen: We achieved revenues on a TCE basis of $106.3 million and EBITDA of $83.7 million. Net income came in at $47.1 million, equal to $0.29 per share. We continue to show good cost control, and operating expenses for the quarter were $19.2 million, and G&A was $4.7 million. We are pleased with the result for the quarter, and the vessels in the spot market achieved robust earnings of $54,000 per day, and the vessels on time starters made $39,500 per day. The average GC achieved for the quarter was $50,900 per day.
Speaker Change: Now over to the P&L, we have seemed revenues on TCE basis come down $6 3 million and $3 7 million.
Net income came in at $47 1 million equal to 29 cents per share.
Speaker Change: We continued to show good cost control and operating expenses for the quarter were $19 2 million and G&A looked for cornerstone.
Speaker Change: We are pleased with our results for the quarter and on the vessel and that spoke to.
Speaker Change: Market achieved robust earnings with $54000 per day on the vessels sometimes structures.
Speaker Change: 39 on a per day.
Speaker Change: The average TCE achieved for the quarter was $50900 per day.
Laila C. Halvorsen: And then over to the cash flow highlights. We started the first quarter with $74.7 million in cash, and we generated $83.7 million in EBITDA. Ordinary debt repayment and cash interest amounted to $15 million, and $35.5 million was allocated to shareholders through a cash dividend, while $3.9 million was used for maintenance capital. We prepaid $24 million on the ING revolving credit facility, while 7.2 million was related to changes in working capital, and the quarter ended with $73 million in cash. Switching to capital allocation.
Speaker Change: And then over to the cash flow highlights.
Speaker Change: We started the first quarter with 74 7 million in cash and we generated $83 7 million and EBITDA.
Speaker Change: Ordinary debt repayments and cash interest amounted to 15 milligram and 35 and a half from Atlanta was allocated to shareholders through our cash dividend.
Speaker Change: $3 9 million analysts used for maintenance Capex.
Speaker Change: We prepaid 20 for me now the IMG and revolving credit facility by $7 2 million was related to changes in working capital in the quarter ended with 73 million in cash.
Speaker Change: Switching to capital allocation.
Laila C. Halvorsen: DHT has a defined and predictable capital allocation policy, and in line with our policy, we will pay 29 cents per share as a quarterly cash dividend, which is equal to 100% of ordinary net income. The dividend will be payable on May 31st to shareholders of record as of May 24th. This marks the 57th consecutive quarterly cash dividend, and the shares will trade ex-dividend from May 22. On the left side of this slide, we present an update on estimated P&L and cash break-in rates for 2024.
Speaker Change: D. S. T has a defined unpredictable capital allocation policy and in line with our policy, we will pay 29 cents per share quarterly cash dividend, which is equal to 100% of ordinary net income.
Speaker Change: The dividend will be payable on may 31st to shareholder of record as of May 24.
Speaker Change: This marks the 57th consecutive quarterly cash dividend on the shares will trade ex dividend from May 23rd.
Speaker Change: On the left side of this slide represents an update on my estimate the P&L cash breakeven rates for 2024.
Laila C. Halvorsen: P&L breakeven for the full year is estimated to be $27,500 per day for the fleet. Our cash breakeven is estimated to be $18,300 per day, resulting in $9,200 per day per shift in discretionary cash flow of the dividend. So assuming the vessels earn P&L breakeven, this means about $79 million in discretionary cash flow for the year. On the right side of the slide, we illustrate the quarterly cash dividend we have returned to shareholders since we updated the dividend policy in the second half of 2022. This amounts to a total of $1.70 per share. And with that, I will turn the call over to Svein.
Speaker Change: PMA was breakeven for the full year is estimated to trying to seven and a half per day for the fleet.
Speaker Change: Our cash breakeven at that too.
Speaker Change: $10300 per day, resulting in $9200 per day per ship and discretionary cash flow after dividends.
Speaker Change: So assuming the vessels aren't P&L breakeven. This means about 79 million in discretionary cash flow for the year.
Speaker Change: On the right side of the slide we illustrate the quarterly cash dividend, we have returned to shareholders. Since we updated the dividend policy in the second half of 'twenty two.
Speaker Change: This amounts to a total of $1.70 per share.
Speaker Change: And with that I will turn the call over to Mike.
Mike: Thank you Donna.
Svein Moxnes Harfjeld: This slide compares DHT spot market performance over the last 12 months with the quoted TD3C index. The TD3C index is the most prominent index representing the largest VCC trade, namely loading in Saudi Arabia and discharging in China. The green lines and the numeric ledgers illustrate our spot learnings for each quarter in the period, and the orange lines show the index learnings. Several reports refer to the index when assessing the VHSE
Mike: This slide compares these T spot market performance over the last 12 months with accrual to the TV three senior mix.
The <unk> index is the most prominent.
Mike: Representing the largest piece to see trade, namely logging in Saudi Arabia and restructuring in China.
Mike: The Green line.
Nick: Nick lectures illustrates our spot earnings for each quarter in the period and the Orange lines show the index earnings.
Nick: Several reports referred to the index when assessing the VLCC market.
Svein Moxnes Harfjeld: As one can clearly see from these numbers, the index is not an appropriate reference for DHT's spot earnings. The earnings power of the ship used in the index calculation is inferior to our average result, so this does not represent the whole delta. The other part reflects our customer base and related trading patterns and what we actually get out of the market. The average delta during this period is about $15,000 a day.
Nick: As one could clearly see from these numbers. The index is local appropriate correct friends for Dht's spot earnings.
Nick: The earnings powers or the ship Houston the index calculation.
Here too our average vessel.
Nick: But this does not represent the whole delta.
Nick: The other part reflects our customer base and related trading patterns.
Nick: We actually get out to the market.
Nick: The average Delta during this period is about $15000 a day.
Nick: Yeah.
Svein Moxnes Harfjeld: On this slide, we have an additional reference to DHT producing competitive spot earnings, and that is when compared to peers. The peer group consists of the usual suspects listed in the U.S., all with similar trading policies with respect to geographical areas and origin of origin. One of the four in the peer group is yet to report for the first quarter of this year.
Nick: Okay.
Nick: On this slide we have an additional reference to DHT producing competitive spot earnings and that is when compared to peers.
Nick: The peer group consists of the usual suspects listed in the U S. All with similar trading policies with respect to geographical areas and origin Award.
Nick: Well over four in the peer group is yet to report for the first quarter of this year.
Svein Moxnes Harfjeld: We illustrate quarterly spot earnings for each peer over the same period as the previous slide, and the numbers speak for themselves, with DHT coming out on top. As usual, we provided our business updates 10 days into the current quarter. The spot market softened a bit following our update, but is now on a strengthening path again. Of the total estimated spot payments for the second quarter, we have booked 72% at $51,000 per day.
Nick: But your interest rates quarterly spot earnings for each peer over the same period the previous slide.
Nick: The numbers speak for themselves.
Nick: With DST coming out on top.
Nick: Okay.
Nick: And after the outbreak for the second quarter.
Nick: <unk>. So we provided rmb's necessitate some 10 days into the current quarter.
Nick: The spot market has softened a bit forwarding, our uptake, but is now on a strengthening path together.
Speaker Change: Well the total estimate the spoke pace for the second quarter, we have booked 7% to 2% at $51000 per day.
Svein Moxnes Harfjeld: You should see this number in relation to the spot P&L breakeven for the second quarter being estimated at about $25,300 per day. As stated in the report, the freight market continues to show steady and reassuring conduct. The slumps in the market are grinding higher, with recent lows levelling out above $40,000 a day for an eco-vessel fitted with exhaust gas cleaning systems.
Speaker Change: You should see this number in relation to the spot P&L breakeven for the second quarter of being estimated at about $25300 per day.
Speaker Change: As stated in the report the freight market continues to show steady and reassuring codecs.
Speaker Change: This lumps in the market are grinding higher with recent lows leveling out about $40000 a day for eco vessels fitted with exhaust gas cleaning systems.
Svein Moxnes Harfjeld: We assess the current spot market for the three main routes on average to be in the mid to high 50s for DHT's average tight-weighted fleet. U.S. Gulf to the Far East is currently a tad behind the Arabian Gulf, South America, and West Africa, but it's likely on the rise. The North Sea to Asia route has been absent for close to two years but is now back on the market with a couple of cargoes per month.
Speaker Change: We assess the current spot markets for the three main routes on average to be in the mid to high Fifty's for Dht's average type weighted tweaks.
Speaker Change: Can you just go to the far East is currently a tad behind Arabian Gulf South America, West Africa, but it is likely on the rise.
Speaker Change: North Sea through Asia has been absent for close to two years, but is now back in the market with a couple of cargoes per months.
Svein Moxnes Harfjeld: We understand that VCCs are gaining market share, now about 50% of seaborne crude oil transportation, underscoring end-users' increasing focus on cost-per-unit transport. This is in particular for the long-haul trades but is also now a result of the Red Sea challenges with parts of the Aegean to Mediterranean trade having moved from Suez Maxis to the Aegean Seas, sailing around the Cape of Good Hope. There is limited time-sharper activity for periods in excess of one year.
Speaker Change: We understand that these receipts are gaining market share now above 50% placebo crude oil transportation.
Speaker Change: This scoring end users increasing focused on cost per units transported.
Speaker Change: This is in particular for the long haul trades, but there is also a result of the Red Sea challenges with parts of the AG to military and then trade having moved from Suezmax ships to Vlccs sailing around Cape of good hope.
Speaker Change: There is limited time charter activity for periods in excess of one here.
Svein Moxnes Harfjeld: However, we currently estimate the three-year time tracker market for a good ship to be in the mid $50,000 per day. And there is one client in the market now asking for bids on this, and there is a field of owners offering this, although higher than our estimate in the market. And in sum, we are increasingly confident about what is ahead of us. The discussion of fleet development and demographics might be repetitive. We have here a presentation of the development with a somewhat different illustration.
Speaker Change: However, we currently estimate the three year time charter market for a good ship to be in the mid $50000 per day.
Speaker Change: One client in the market, though Rick I'll Skip forbid service salaries field orders offering numbers, although higher than our estimated our markets.
Speaker Change: In sum we are increasingly confident about what is ahead of us.
Speaker Change: Sure.
Speaker Change: To discuss where fleet development and demographics might be repetitive.
Speaker Change: We have a.
Speaker Change: A presentation of the development with a somewhat different illustration.
Svein Moxnes Harfjeld: We have applied some key market observations and assumptions. HOM, For example, over 90% of the ships now older than 20 years of age are engaged in shadow markets. This fleet's productivity is estimated to be 50% of its nominal capacity. This is largely due to these ships rarely calling ports but often doing planned shipments of cargoes involving numerous ships and hence delaying the delivery of cargo. And three, we assume ships will disappear from the shadow trade when they reach 25 years old.
Speaker Change: We have applied some key market observations and assumptions.
Speaker Change: Well.
Speaker Change: Over 90% of the ships now over 20 years of age are engaged in the southern markets.
Speaker Change: Two.
Speaker Change: This fleet productivity is estimated to be 50% of its nominal capacity of.
Speaker Change: This is largely due to these ships really clothing ports, but often doing shipments of cargos involving numerous ships delay.
Speaker Change: Delaying the delivery of a cargo.
Speaker Change: And three the assumed ships will disappear from the Shadow trade when it reached 35 years of age.
Svein Moxnes Harfjeld: As we have stated on numerous occasions, we expect the fleet to shrink over the coming years. The blue bars represent the fleet that has been or is below 20 years of age. This part of the fleet is employed in compliant markets, and it's sizeable. Its size probably peaked in 2021 with some 768 ships, when applying our observations and assumptions. We estimate the sub-20-year-old fleet to shrink to less than 730 ships by the end of 2027.
Speaker Change: As <unk> stated on numerous occasions, we expect the fleet to shrink over the coming years.
Speaker Change: The blue bars represents the fleet that has been always below 20 years of age.
Speaker Change: This part of the fleet is employed in a compliant markets and it's sizable at sites probably peaked in 2021 with some 768 ships.
When applying our observations on the assumptions, we estimate the sub term payroll fleet to shrink to less than 730 ships by the end of 2027.
Svein Moxnes Harfjeld: As most of you know, this happens at a time of growing oil demand and expanding transportation distances. The ships in the Saddle Freights are serving a purpose in the market, but with a significant haircut in its productivity. We also take note that following the recent contracting of the ILCs, activity has receded with apparently limited interest from shipowners in contracting large tankers now. We are being told that interest is being directed to other ship types and classifications.
Speaker Change: As most of you will know this happens at the time of growing oil demand and expanding transportation businesses.
Speaker Change: The ships and this had a set of traits are serving a purpose in a markets.
Speaker Change: But with a significant haircut in its productivity.
Speaker Change: They also take note that following the recent contracting of Vlccs that activity has receded that frankly limited interest from ship owners and contracting large tankers now.
Speaker Change: We are being told that interest is being directed to other ship types and classes.
Svein Moxnes Harfjeld: The VCC order book now stands at some 5% of the sailing fleet, supporting our constructive market. On that note, we will discuss our new building projects. As announced, we have constructed four VCCs, all for delivery in 2026. They are contracted to be built at what we deem to be the top quality shipyards for large tankers. The ships will be of super-eco designs, implying premium earning power and related reduced emissions. These ships will have a new engine model that is different from what is being adapted to most of the other new building orders that have been reported over the past few months.
Speaker Change: The VLCC order book now stands at four 5% of the sailing fleet supporting our constructive markets.
Svein Moxnes Harfjeld: In addition, our new building orders are of larger carrying capacity, both in deadweight and cubic trucks, again when compared to most of the other orders that have been placed. This is expected to offer better economics for both customers and DHT. For Seiko Clarity.
Speaker Change: <unk> will discuss our new building projects.
Speaker Change: We have contracted for vlccs or for delivery in 2026.
Speaker Change: They are contracted at what we deem to be the top quality shipyards for large tankers.
Speaker Change: The ships will be a super equaled the science, implying premium earnings power and related reduced emissions.
Speaker Change: These ships will have a new engine model that is different from what is being adapted to most of the other new building orders that had been reported over the past few months.
Speaker Change: Further our new building orders are larger carrying capacity both in deadweight cubic terms.
Speaker Change: When compared to most of the older orders that had been placed.
Speaker Change: This is expected to offer better economics for both customers and <unk>.
T.
Speaker Change: For sake of clarity.
Svein Moxnes Harfjeld: We have no plan to declare the options for the additional vessel. Our next priority would be secondhand acquisitions, should we be able to identify opportunities attractive to DHT. As stated, we do not intend to issue any new capital in relation to this new building project, and our financing plan consists of cash flow from operations, available liquidity, and new mortgage debt. With respect to new mortgage debt, our base case assumes about $60 million per vessel with a DHT-style financing structure.
Speaker Change: We have no plan to declare the options for the additional vessels.
Speaker Change: Our next priority would be second on acquisitions should we be able to identify opportunities attractive to DHT.
Yeah.
Speaker Change: As stated.
Speaker Change: Not intend to issue any new capital in relation to this new building projects.
Speaker Change: Financing plan consists of cash flow from operations available liquidity of new mortgage debt.
Speaker Change: With respect to new mortgage debt, our base case assumes about $60 million per vessel with a DHT style financing structure.
Svein Moxnes Harfjeld: And importantly, the project and our strategy assume that the dividend policy with 100% of ordinary net income shall remain in place. This last slide is familiar, so we will round up by saying that our markets are robust, providing good support, and are steadily, albeit gradually, improving. Our team is doing a great job of getting the most out of what the markets have to offer, delivering premium earnings for our ship. Contracting on your ship seems to have receded, and we are supporting the highly constructive supply application.
Speaker Change: And importantly, the project at our strategy assume that the dividend policy with 100% of ordinary net income should remain in place.
Speaker Change: This last slide is familiar so we will round off by saying that our markets are robust providing good support and a steadily all by gradually improving.
Speaker Change: Our team is doing a great job in getting the most of the markets have to offer delivering premium earnings for our ships Contra.
Speaker Change: Contracting all new shapes seems to receive it and supporting the highly constructive supply outlook.
Svein Moxnes Harfjeld: And we'll stick to our knitting with a focus on first-rate operations and related financial results in anticipation of increasingly rewarding times ahead. And with that, operator, over to you. Thank you. As a reminder, to ask a question...
Speaker Change: And we will stick to on anything with a focus on first rate operations unrelated philosophy results in anticipation of an increasingly rewarding times ahead.
Speaker Change: Operator over to you.
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 while we compile the Q&A queue. Our first question comes from the line of Frode Morkedal from Clarkson Securities. Please go ahead; your line is open.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on one on your telephone and wait for your name to be announced.
Speaker Change: Your question. Please press star one on one again please.
Speaker Change: Please stand by while we compile the Q&A Steve.
Speaker Change: Our first question comes from the line of <unk> <unk> from Clarksons <unk> Securities. Please go ahead. Your line is open.
Frode Morkedal: Thank you. High five.
Speaker Change: Thank you Hi Fi.
Speaker Change: Hi.
Frode Morkedal: I had a question on the VLC and the trading patterns. I feel like the smaller tankers we all know have been benefiting from diversion around Africa and longer tonne miles. But what do you see on the real estate trade pattern? I think you mentioned briefly that the VLCs are taking Suez Maxx cargoes. Maybe you can elaborate on that, and are you seeing any other changes?
Speaker Change: Yeah.
Speaker Change: I had a question on <unk>.
Speaker Change: On the VLCC.
Speaker Change: The trading pattern.
Speaker Change: I feel like it.
Speaker Change: The smaller tankers, we all know have been benefiting from that person around Africa and longer ton miles.
Speaker Change: But what do you see the pattern I think you mentioned briefly.
Speaker Change: The Vlccs uptake Suezmax cargos.
Speaker Change: Maybe you can elaborate on that.
Speaker Change: Are you seeing any other changes.
Svein Moxnes Harfjeld: It's, you know, really related to the Red Sea, as I stated, that some of that Suez Maxx trailer typically went through the Suez Canal into the Mediterranean, and now they are being sort of put together on large ships on the eastern seas and thereby sailing around South Africa. So, this is a smallish part of the market that is nevertheless sort of adding distance, if you like. So, I would say this is the primary change in the current environment.
Speaker Change: Yes.
Speaker Change: Really related to the Red CSI as I stated that some of that Suezmax trade. It typically went through the Suez canal into the Mediterranean.
Speaker Change: And now being sort of together.
Speaker Change: Our ships are these disease, and thereby saving around South Africa.
Speaker Change: This is a smallish part of the market, but it is nevertheless, sort of adding in this business. If you like so it's a I would say this is the primary.
Speaker Change: <unk> changed.
Svein Moxnes Harfjeld: And we have one trade that is on the doorstep of evolving, and that is the TMX project out of Vancouver, on the West Coast of Canada, where we expect a meaningful portion of that crude oil to head further south for transshipments over to the Aegean Seas, and then to head to Asia, China in particular. They have been discussing this with us and, I'm sure, with others and expect that trade to evolve. So that is an interesting addition to the VCC market.
Speaker Change: In the current environment.
Speaker Change: We have one trade that is sort of on the doorstep of evolving and that's just the <unk> project also in Vancouver West Coast of Canada.
Speaker Change: Where we expect a meaningful portion of that is crude order to have the.
Speaker Change: Further south for <unk> shipments over two Vlccs, and then to head to Asia, China in particular.
Speaker Change: This partly on the fact that.
Speaker Change: One of the big one of the two Chinese state owned oil companies on a quarter over the equity in this project.
Speaker Change: And they have been discussing this with us and I'm sure with others and they expect that trades at all.
Speaker Change: That is an interesting addition to two <unk>.
Svein Moxnes Harfjeld: But beyond that, it's just a general trend of really, you know, there are more barrels coming from the Atlantic. Petrobras is increasing production. Guyana will also, at some point, get more involved in the fight against malaria. So, and as I mentioned, the North Seas seem to be back, although sort of only with a couple of cargoes a month, but there are some new incentives in Korea, in particular, we understand that will maybe stimulate that trade to potentially grow.
Speaker Change: To the anesthesia markets, but beyond that it's just a general trend.
Speaker Change: Really.
Speaker Change: It was more barrels coming from from the Atlantic.
Speaker Change: Petrobras is increasing production.
Speaker Change: We'll also at some point to get more involved in.
Speaker Change: It means disease, so and as I mentioned in the North Sea is seem to be back although sort of only with a couple of cargoes a month, but.
Speaker Change: So new.
Speaker Change: <unk>, saying Korea in particular, we understand that that may be stimulus that trade to prepare us for growth.
Svein Moxnes Harfjeld: Okay, that's interesting. That's good, Kalle. On the new build, you mentioned that they are super efficient. Can you quantify the fuel consumption versus, you know, the existing fleet you have?
Speaker Change: Okay that's interesting.
Speaker Change: Yes.
Speaker Change: That's good color.
Speaker Change: On the Newbuild.
Speaker Change: You mentioned that there are super Eco could you quantify.
Speaker Change: Five.
Speaker Change: Fuel consumption.
Speaker Change: Versus.
Speaker Change: Thanks <unk>.
Frode Morkedal: The simple answer is no, so we know what it is, obviously, and we will be in detailed discussion with some of our key customers that are interested in these ships on those particular features. But it is a marked improvement from the five ships that we have that were all built in 2018, which is sort of the last class of these large vessels. So it's a marked improvement. We're very excited about getting these assets into the water and getting to see what they can deliver.
Speaker Change: The simple answer is low so we know what it is obviously.
Speaker Change: He will be in detailed discussions with some of our key customers that are interested in these ships on those particular.
Speaker Change: Sort of features.
Speaker Change: Got.
Speaker Change: It is.
Speaker Change: Mark improvement from the five ships that we are.
Speaker Change: We have endeavored all built in 2018.
Speaker Change: Then the last class of these large vessels ships. So its a marked improvement. So we're very excited about getting these assets into the water.
Speaker Change: And I get to see what they can deliver.
Speaker Change: Yes.
Speaker Change: Well the interesting note though.
Frode Morkedal: It will be interesting to know those facts when they arrive. Well, my last question is on, let's say, sentiment. I feel like, in the stock market, at least investor sentiment has improved a lot recently, basically switching from, let's say, a cautious approach to, basically reflecting the fair fundamentals of WECI at least. But how do you see the sentiment among shipowners in the physical world, so to speak? the mood right now.
Speaker Change: Alright.
Speaker Change: My last question is on.
Speaker Change: But the sentiment.
Speaker Change: Like in the stock market.
Speaker Change: Sentiment has improved a lot.
Speaker Change: Recently.
Speaker Change: Secret switching from that.
Speaker Change: Okay.
Speaker Change: Cautious approach too.
Speaker Change: Sure basically reflecting the fair fundamentals.
Speaker Change: We see it at least.
Speaker Change: But how do you see the sentiment among ship owner in the physical world So to speak.
Speaker Change: What's the mood right now.
Svein Moxnes Harfjeld: I think some of the traditional tanker owners, at least a couple or three of them, have made their bets on the new building site, and they seem to be content with what they have done. So one being Bari, which is Saudi Aramco's ship-owning arm, and I think that's an encouraging sign because they're, of course, very close to a significant state-owned oil company who plays a very important role in the oil market in general. So if they are in need of more ships, I think that might be an indication of what their expectations are.
Speaker Change: I think some of the traditional tanker owners.
Speaker Change: At least coppola three of them.
Speaker Change: It made their bets on the newborn side, then there seem to be sort of content and what they have done.
Speaker Change: They seem to be still interested.
Speaker Change: <unk>, maybe older spectrum, all that out when their prototype.
Speaker Change: I Love Til therapy.
Speaker Change: Market.
Speaker Change: It's not out of the market. So you should challenge all the people on that.
Speaker Change: The asking prices for for modern ships.
Speaker Change: On the large factories are quite elevated and there are some interest around in particular from a couple of states.
Speaker Change: Actors so.
Speaker Change: One of them being.
Speaker Change: Barry which is Saudi Aramco shipbuilding arm.
Speaker Change: And I think that's sort of a.
Speaker Change: Encouraging sign because there are of course very close to.
Speaker Change: A significant state owned oil company replaced on a very important role in the oil market in general.
Speaker Change: So if they are in need of more ships I think that might be an indication of a walk.
Speaker Change: So expectations are and they are focusing on modern secondhand ships.
Frode Morkedal: Perfect. Great. Thanks. That's all for me. Thank you.
Speaker Change: Perfect Great. Thanks, that's all for me.
Operator: Thank you. We'll now move on to our next question. Our next question comes from the line of Omar Nokta from Jeffreys. Please go ahead; your line is open.
Will: Thank you will.
Speaker Change: Now move onto our next question.
Speaker Change: Our next question comes from the line of from Jefferies. Please go ahead. Your line is open.
Omar Mostafa Nokta: Thank you. Hey guys, good morning, good afternoon.
Speaker Change: Thank you.
Speaker Change: Good morning. Good afternoon, just wanted to just ask about the Vlccs.
Omar Mostafa Nokta: Svein, just wanted to ask about the VLCCs. You mentioned, and we've seen that the market for new orders has kind of cooled from other ship owners. You decided not to exercise the four options. And just wanted to ask, just in terms of, I guess, perhaps maybe on sentiment, but maybe just in general, big picture, why do you think there's been a cooling in terms of new orders? And then also, is that cooling intended to transition towards DHT, or was the plan all along not to really exercise those options?
Speaker Change: You mentioned that we've seen that that the market for.
Speaker Change: For new orders is kind of cooled from other ship owners, you decided not to exercise the four options.
Just wanted to ask just in terms of I guess, perhaps maybe on sentiment, but maybe just in general Big picture why do you think theres been a cooling in terms of new orders and then also is that cooling has the transition towards DHT or was the plan all along not to really exercise those options.
Svein Moxnes Harfjeld: All that cooling has nothing to do with DHT. I think we stand independently in making our decisions. So this is sort of a coinciding event. I think there's a couple of other markets that maybe are now looking attractive for some reason or another, and this is maybe a market that I'm not following so much, so I can't give you all the details on that, but that seems to be the case. But I think also at the get-go now, there was not sort of a big horde of owners ready to order chips for a variety of reasons.
Speaker Change: Cooling has nothing to do with Asia with DST I think.
Speaker Change: In the independent play in making our decisions.
Speaker Change: So this is sort of a coinciding event I think theres a couple of other markets that maybe are looking attractive for some reason or another.
Speaker Change: And this is maybe a market the dominoes falling so much. So so I can't give you that all the details on that but that seems to be the case.
Speaker Change: But I think also to get.
Speaker Change: They were not sort of.
Speaker Change: Big Florida, almost ready to order ships for a variety of reasons I think that although maybe project ambitions or.
Priorities when I came to allocation of capital.
Speaker Change: No.
Speaker Change: LNG CMC is built to suck up a lot of capital from the shipbuilding industry.
All of those ships are.
Speaker Change: At least twice as much to us.
Speaker Change: <unk> so.
Speaker Change: Yeah, it's probably a mix of reasons.
Svein Moxnes Harfjeld: I think lastly, you know, deliveries now are really four years, no, no, three years out at least. So you're looking into 27. I think that could also be a bit of a turnoff for most people. They would like to have ships, you know, earlier delivery, and which is why we were a bit sort of keen to get that deal done quickly because we had deliveries, which are now the first ships in less than two years to deliver. So we found that attractive. It's probably a mix of things.
Speaker Change: I think lastly deliveries now are really four years three years out at least so youre looking into 2007, I think that could also be.
Speaker Change: A bit of a turnoff for most people they would like to have ships earlier delivery.
Speaker Change: Which is why we were.
Speaker Change: Keen to get our deal done quickly because we have.
Speaker Change: Deliveries, which is now the first ships is less than two years.
Speaker Change: Delivery. So we found that attractive so its probably a mixture of things.
Omar Mostafa Nokta: Okay, thanks Brian, that was very helpful.
Okay. Thanks, Brian that was very helpful.
Svein Moxnes Harfjeld: Just to add, our decision is more that when you go to a yard, you are typically offered options, and, of course, you would like to have them. If we had a long-term project for several of these ships, then we would probably have gone ahead with one or several of them, but that is maybe not realistic in the short time. And this new building project is not half a billion dollars, so it's already a big commitment. Priority would be second, and if we can find it, and there's a big if on that because it's not a given.
Speaker Change: But just to add so you know our decision is more debt.
Speaker Change: When you go to your already typically auto production and of course, you would like to have them they have been.
Speaker Change: If we have a long term project for several of these ships than we probably haven't gone ahead with Walmart or several of them, but that is not realistic in the short time.
Speaker Change: This new building program is north of half a billion dollars is already big.
Speaker Change: Commitment financially for the company.
Speaker Change: So to sort of double double up on that we think would be too big a commitment at this point.
Speaker Change: Priority would be secondary if we can find it and there's a big if on that because theres not forgiven.
Omar Mostafa Nokta: Yeah, no, clearly, that makes sense. And maybe, you know, I'll just one quick follow-up, which you mentioned, which I thought was interesting, the discussion about, you know, the vessels that are over 20 years of age having 50% productivity. Is that an assumption you're making about perhaps the future? Or is that something you're actually seeing now? And is that, is there anything similar for maybe vessels over 15 also in line with that?
Speaker Change: Now clearly it makes sense and maybe just one quick follow up just you mentioned, which I thought was interesting.
Speaker Change: Discussion of the vessels that are over 20 years of age having 50% productivity.
Speaker Change: That an assumption youre, making up perhaps the feature or is that something you're actually seeing now and is that is there anything similar for maybe vessels over 15.
Svein Moxnes Harfjeld: Well, for the ships over 20, you know, as we mentioned, over 90% of those ships are in the shallow trade. And this is what we see now.
Speaker Change: So in line with that.
Speaker Change: So for the ships over 20, you know as we mentioned over 90% of those ships are in the shallow trade and this is what we see now this is happening because many of these ships are not fit to go into many of the load and discharge ports.
Svein Moxnes Harfjeld: This is happening because many of these ships are not fit to go into many of the load and discharge ports that are being used. So there's a lot of transhipment from smaller to smaller ships. And this all takes a lot of time.
Speaker Change: Being used so there's a lot of trans shipments.
Speaker Change: From smaller and into smaller ships.
Svein Moxnes Harfjeld: It's very inefficient, so that fleet is sort of, very quickly, not as productive as its nominal capacity would suggest. When it comes to shifts between 15 and 20, the utilization is the same as for younger ships. We have four ships in this category, and there's no difference in utilization and productivity. The only thing is, from time to time, the freight rate that you're offered for a ship that is between 15 and 20 is then mostly at a marginal discount to what a more modern ship would achieve. But there's no change in productivity or efficiency.
Speaker Change: And this all takes a little time its very inefficient. So so so that fleets are very quickly.
Speaker Change: It's not as productive as normal capacity would suggest.
Speaker Change: We accomplished shifts between 15 and 20 and the utilization is it the same as for younger ships. We have four ships in this category and Theres no difference in utilization and productivity. The only thing is from time to time the freight rate that you're offered for a ship that is between 15 and 20 is than most.
Speaker Change: Yes.
Speaker Change: Marginal discount to what Theyre more modern ships with the chain.
Speaker Change: But there is no change in the productivity or efficiency.
Omar Mostafa Nokta: Okay, very good. Thank you, Svein. Thank you, we'll now...
Speaker Change: Okay very good thank you so much.
Operator: Thank you, we'll now move on to our next question. Our next question comes from the line of Ben Nolan from Stiefel. Please go ahead, your line is open.
Speaker Change: Thank you we will now move onto our next question.
Speaker Change: Our next question comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.
Ben Nolan: Yeah, thanks and good afternoon. Actually, I wanted to follow up on the question about the options that Omar was talking about. I was just curious how long you have those options, or, assuming that they're still outstanding, just trying to think about sort of the possibilities as if, you know, would it be possible to maybe flip those? Should they get, you know, into the money, and you can, you know, place the order and then resell it at a higher price? Is there any way to potentially monetize that? Or is the option duration just not long enough?
Ben Nolan: Yes. Thanks.
Speaker Change: Good afternoon.
Ben Nolan: I actually I wanted to follow up on the question about the options that Omar was talking about.
Just curious how long you have those options or assuming that they are still outstanding just just trying to think about sort of the.
Ben Nolan: The possibilities.
Ben Nolan: Would it be possible to maybe flip those.
Ben Nolan: Should they get become in the money and you can.
Ben Nolan: Placing the order and then resell it at higher price or is there any way to potentially monetize that.
Ben Nolan: Or are the option duration, just not probably long enough.
Svein Moxnes Harfjeld: We did not communicate the timeline of those options, so they had various declaration times and sort of a staggered schedule, so we will leave it at that. I think the options would be in the money today, if you can say that. I think realistically, to sort of resell those contracts or birds, you would have to declare them and make them a firm contract for that to really be realistically possible. So it's hard to sort of sell that paper and think you can sort of get, you know, a few million in between.
Ryan: Well, we did not communicate the time Ryan those options. So they have various declaration time spend.
Speaker Change: <unk> schedule. So so we will leave it at that.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Options would be in the moment today, you can say that.
Speaker Change: I think realistically to resell those contractual burts you would have to declare that they can make them a firm contract for that to really the realistically possible. So.
Speaker Change: It's hard to sort of sell that paper and I think you can sort of get.
Speaker Change: A few million dollars in between so I think thats unrealistic case if.
Speaker Change: If we were to pursue that Avenue. It meant we had to commit to the contracts first right.
Svein Moxnes Harfjeld: So I think that's not an unrealistic case, and if we were to sort of pursue that avenue, it would mean we had to commit to the contract first, right? And as I mentioned, we have other priorities if we are going to invest additional money now going forward than to add new buildings.
Ben Nolan: Okay, that's helpful. I appreciate it.
Speaker Change: As I mentioned, we have other priorities, if we are going to invest.
Speaker Change: Additional enrollment now going forward.
Speaker Change: And to add new buildings at this point.
Ben Nolan: And then, just secondly, on time charter contracts, you mentioned that the charter market was especially thin, which seems to me is a little bit surprising given the, to me at least, the discount between where the spot market has been trading for a while and the kind of rate that you put out there. Is that something you expect the margin to narrow, or especially as we move into the back half of the year, when things normally get tighter? And just sort of how are you thinking about where you would like the fleet to be positioned from a spot versus contract standpoint?
Speaker Change: Got it Okay. That's helpful. I appreciate it.
And then just secondly.
Speaker Change: On the time charter contract you mentioned that the.
Speaker Change: The charter market was especially fan which.
Speaker Change: It seems it's a little bit surprising given that to me at least the discount between where the spot market has been trading for a while and the kind of rate that you put out there.
Speaker Change: Is that something you expect.
Speaker Change: The margin to narrow them or especially as we move into the back half of the year and I think it's normally get tighter and just sort of how are you thinking about where you would like the fleet to be positioned from a spot versus contract.
Svein Moxnes Harfjeld: I think one aspect here is that ship owners with sort of, you know, in-house operations, quality ships that are, so to say, eligible for this term business, [inaudible] And I think a project like that might clear in the sort of mid-50s; that's where the market probably is. So let's see if this project will happen. So, I think it's a result of the task that... I think eventually, you know, there will be more end users coming to the market to try to secure tonnage because this market evolves. It will be attractive for them to secure ships for three years, and also for five years. I would think so, but it's a bit early in the
Speaker Change: Standpoint.
Speaker Change: I think well.
<unk> carriers that.
Speaker Change: Ship owners.
Speaker Change: In those operations quality ships that are such as they're eligible for these term businesses.
Speaker Change: They have a quite solid expectations for the future. So the bid ask spread is quite wide.
Speaker Change: There is currently one project in the market.
Speaker Change: Sure.
Speaker Change: No.
Speaker Change: All companies looking for a three year charter for one or more ships.
Speaker Change: All the bids.
Speaker Change: I mean, that's what our average call. It around 60, we believe although we don't have the defects because he believes so asking prices and I think project that Mike cleared in sort of mid <unk>, that's where the market is probably less so let's see if the if these projects will happen.
Speaker Change: So I think as a result of bid ask that.
Speaker Change: I think eventually there will be more.
Speaker Change: And users coming to the market to try to secure tonnage because as this market evolves.
Speaker Change: It will be attractive for them to secure ships for three years also five years I would think so but it's a bit early in the up cycle for that to occur.
Speaker Change: <unk>.
Ben Nolan: And what do you, how are you thinking about sort of where you would like to be positioned? From a percentage of your floor?
Speaker Change: Okay.
Speaker Change: And what do you how are you thinking about sort of where you'd like to be positioned.
Svein Moxnes Harfjeld: As we stated before, we have a clear ambition to build more fixed income for the company. But we prefer that fixed income to be of a longer-term nature, so we are not entertaining, say, inquiries for one-year charters or two-year charters. And we're also, of course, looking for the right money for the right ship. So there are sort of finer details there for us to do things. But, you know, our customer base involves customers that typically will look for term charters. So, you know, assuming that we are right about this market evolving, then you should expect us to work hard to try to put some of that to bed.
Speaker Change: Percentage of growth.
Speaker Change: So as we've stated before if we have.
Speaker Change: A clear ambition of building more fixed income.
Speaker Change: For the company.
Speaker Change: But we prefer that fixed income to be a longer term nature. So we will not we are not entertaining say inquiries for charters of two year charters.
Speaker Change: And if you also of course looking for the right model for our chip So theres sort of a final details there for us to do things.
Speaker Change: So.
Speaker Change: Yeah.
Speaker Change: Our customer base in Golestan customers that typically will look for term term charter so.
Speaker Change: Assuming that we are right in this market evolving them you should expect us to work hard to try to put some of that Tibet.
Ben Nolan: All right, great. I appreciate it. Thank you. Thank you.
Speaker Change: Alright, great I appreciate it thank you.
Operator: Thank you. We'll now move on to our next question. Our next question comes from the line of Peter Hawthorne from ABG Sundall Collier. Please go ahead; your line is open.
Speaker Change: Thank you we will now move.
Speaker Change: Next question.
Speaker Change: Our next question comes from the line of Pizza Hogan from AVG Farmville Carla. Please go ahead. Your line is open.
Peter Hawthorne: Thank you. A quick question from me on prices here. So, in the new building markets, we've been told that there are discrepancies between geographies, obviously, but could you please help us quantify what it would actually mean now if you were to, not with options but coming fresh to the yard, ask for the LCC, and also then, what timing of the liberation?
Speaker Change: Thank you.
Pizza Hogan: A quick question from me on <unk>.
Eric: This is Eric.
Speaker Change: And then you build markets.
Speaker Change: <unk> been told that there are these classes between geographies, obviously, but could you. Please help.
Speaker Change: Help us quantify.
Speaker Change: What would actually mean now with regards to with options.
Speaker Change: Coming fresh to the odds ask for.
Speaker Change: All spot VLCC and also them.
Speaker Change: While timing of deliberation with respect.
Svein Moxnes Harfjeld: If you go to Korea, the yards are asking north of 130 million, and that is essentially for 27 delivery. Those ships will be of 300,000 ton designs, so smaller than the ships we have ordered.
Speaker Change: So you can go to Korea.
<unk> are asking north of 130 <unk>.
Speaker Change: Lynn.
Speaker Change: And that is for essentially 427 delivery.
Speaker Change: Those ships will be over 300 hospitals home designs. So is smaller than the ships were ordered.
Svein Moxnes Harfjeld: And the sort of headline price also excludes the scrubber. So this, of course, is the basis for negotiation, right? But I think it would have to start with a 1-3 handle to make it happen. If you go to China, to the top yards in China, I call that three of those yards, they will be asking 123-ish, I think, today, also for 27 delivery. That is also a smaller ship, and also typically, the asking price excludes the scrubber, but it will be, again, whereby the two other big Korean yards seem to be more content with their backlog and not really entertaining inquiries with any excitement.
Speaker Change: They're sort of headline price also excludes subscriber.
Speaker Change: This of course of all the.
Speaker Change: Bases for negotiation, but I would think it would have to start with a one three start.
Speaker Change: To make it happen.
Speaker Change: If you go to China to the top yards in China call that.
Speaker Change: Three of those yards.
Speaker Change: They will be asking 123 ish I think today also for 'twenty seven delivery.
Speaker Change: That is also a smaller ship and also typically the asking price exclude subscribers, but it will be sort of at them again.
Speaker Change: After negotiations so that is the price delta in the delivery and some of the top yards in China are running out of space for 27%.
Speaker Change: I actually have a tighter backlog than at least one other inquiry on the orix.
Speaker Change: Two of the or the two other be clearing yards to seem to be more compelled to their backlog and not really entertaining inquiries.
Speaker Change: And the excitement.
Peter Hawthorne: Okay, that's very helpful. Thank you. And just as a quick follow-up, in the gray fleet or black fleet, if you will, what sort of TCE equivalents would you retrieve if you were to do illicit trading?
Speaker Change: Okay, that's very helpful.
Speaker Change #100: Thank you.
Speaker Change #101: Just as a quick follow up.
Speaker Change #101: In the gray fleets or block weight, if you will.
Speaker Change #101: TCE equivalents would you if you were to do the listed Friday These days.
Svein Moxnes Harfjeld: We're not venturing into that, so we're not even trying to smell it, so it's, you know, we're being told a little bit here and there what it is, and some of the lumps and frays that are being paid are, call it, sort of twice what is being done in the compliant markets. And then it's sort of down to how long it takes to deliver cargo and so forth.
Speaker Change #102: We are not venturing into that.
Speaker Change #102: Even client to smell it.
Speaker Change #102: We have of course, we are being told a little bit higher than what it is.
Speaker Change #102: Some of the lump sum freights that are being paid are call. It sort of twice what is being done in the in the compliant markets.
Speaker Change #102: It's sort of down to a long time to time does it take to deliver the cargo and so forth, but the capital of course invested and those ships are.
Svein Moxnes Harfjeld: But the capital, of course, invested in those ships is very different from what the big public companies and the leading Greeks are running. So I guess the returns are quite attractive, which is why they're doing it.
Speaker Change #102: Very different too.
Speaker Change #102: So the big public companies and the leading Greeks.
Speaker Change #102: Running so.
Speaker Change #102: So I guess the returns are quite attractive which is why they're doing it.
Peter Hawthorne: Okay, no, that's all for me. Thank you.
Speaker Change #102: Okay.
Speaker Change #102: Okay.
Speaker Change #103: Thats all for me. Thank you. Thank you so much.
Speaker Change #104: Thank you.
Operator: There are no further questions at this time, so I'll hand the call back to Svein for his closing remarks.
Speaker Change #105: Your next question at this time I'll hand, the call participants for closing remarks.
Svein Moxnes Harfjeld: Thank you very much to everyone who's been on the call and listening to us, and thank you for staying tuned to DHT. I wish you all a good day ahead.
Speaker Change #106: Well. Thank you very much to everyone, who has been on the call and listening to us and thank you for staying tuned to these team we've seen oil and good debt.
Alright.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.
Speaker Change #106: Okay.
Speaker Change #106: [music].
Speaker Change #106: Okay.
Speaker Change #106: [music].