Q2 2024 DHT Holdings Inc Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the DHT Holdings Inc earnings conference call for Q2 2024.
Speaker Change: Good day and thank you for standing by welcome to the Q2 '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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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: 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 this session you will need to press star one one on your telephone you will then have an automated message advising Johan is raised to withdraw your question. Please press.
Johan: Still one one again.
Johan: Please be advised that today's conference is being recorded.
Johan: I would now like to hand, the conference I thought your speaker today Laila Halvorsen CFO. Please go ahead.
Laila Halvorsen: Thank you.
Laila Halvorsen: Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' second 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 link to the slide deck can be found on our website, DHTankers.com. 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 August 20th.
Laila Halvorsen: Good morning, and good afternoon, everyone welcome and thank you for joining DHT Holdings second quarter 2024 earnings call.
Speaker Change: I'm joined by Dht's, President and CEO and Mark Smith.
Speaker Change: As usual, we will go through financials and some highlights before we open up for your questions.
Speaker Change: Link to the slide deck can be found on our website each tank versus dotcom.
Laila Halvorsen: In addition, our earnings press release will be available on our website and on the SSE EDGAR system as an exhibit to our Form 6K. 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. However, 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 SSE EDGAR system, including the risk factors in those reports, for more information regarding the risks that we face.
Before we get started with todays call I would like to make the following.
Speaker Change: Remarks, a replay of this conference call will be available on our website the interest anchors dot com until August 20th.
In addition, our earnings press release will be available on our website and on the SST Edgar system as an exhibit to our form 6K.
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 as detailed in our financial report.
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 SSD Edgar system.
Speaker Change: Including the risk factors in these reports for more information regarding risks that we face.
Laila Halvorsen: As usual, 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 18.6% based on market values for the ships, and Net Debt was $14.2 million per vessel. The second quarter ended with total liquidity of $263 million, consisting of $73 million in cash and $191 million available under our evolving credit facility. Now over to the P&L.
Speaker Change: As usual, we will start the presentation with some financial highlights we.
Speaker Change: We maintain a very strong balance sheet represented by low leverage and significant liquidity.
Speaker Change: At quarter end financial leverage was 18, 6% based on market values for the ships.
Speaker Change: That was $14 2 million per vessel.
The second quarter ended with total liquidity of 263 million consisting of $73 million in cash and 191 million available under our revolving credit facility.
Laila Halvorsen: We are pleased with the results for the quarter. We achieved revenues on a TC basis of 103.7 million and EBITDA of 80 million. Net income came in at 44.5 million, equal to 27 cents per share. Vessel operating expenses for the quarter were 20.4 million, which included some one-offs in addition to timing of purchases of spares and consumables.
Speaker Change: Now over to the P&L.
Speaker Change: We are pleased with the results for the quarter, we achieved revenues on TCE basis of 103 7 million and everyday.
Speaker Change: Million.
Speaker Change: Net income came in at 44, and a half million equal to 27 cents per share.
Speaker Change: Operating expenses for the quarter were 24 million, which included some one offs in addition to timing of purchases.
Speaker Change: Spares and consumables.
Laila Halvorsen: GNA for the quarter was $4.5 million. The vessels in the spot market achieved robust earnings of $52,700 per day, and the vessels on time charters made $36,400 per day. The average TC achieved for the quarter was $49,100 per day.
Speaker Change: G&A for the quarter was four and a half a million.
Speaker Change: The vessels in the spot market achieved robust earnings with $52700 per day.
Speaker Change: On the vessels, sometimes doctors made $76400 per day.
Speaker Change: They are cheap.
Speaker Change: The average TCE achieved for the quarter was 49.
Speaker Change: <unk> hundred dollars per day.
Laila Halvorsen: For the first half of 2024, our spot vessels achieved $53,400 per day, while the average combined time charter equivalent earnings came in at $50,000 per day. Net income for the first half of 2024 came in at 91.6 million, equal to 57 cents per share. Now over to the Cash Flow Highlights. The cash flow for the second quarter of 2024 was stable, and we started the quarter with $73 million in cash.
Speaker Change: For the first half of 'twenty 'twenty four our spot vessels achieved $53400 per day, while the average combined time charter equivalent earnings came in at $50000 per day.
Net income for the first half of 'twenty 'twenty four came in at $91 6 million equal to 50 cents per share.
Speaker Change: And then over to the cash flow highlights.
Speaker Change: Cash flow for the second quarter of 'twenty 'twenty, four and was stable.
Speaker Change: And we started the quarter with 73 million in cash we generated 18 million in EBITDA.
Laila Halvorsen: We generated $80 million in EBITDA. Ordinary debt repayment and cash interest amounted to $16,000,000, and $46,800,000 was allocated to shareholders through a cash dividend, while $0,800,000 was used for maintenance capital. We paid the first installments for all four new buildings amounting to $51.5 million, and we drew $25 million on the ING revolving credit facility to partly fund the installments together with our discretionary cash flow.
Speaker Change: Ordinary debt repayments and cash interest amounted to $16 million and $46 eight.
Speaker Change: 8 million was allocated to shareholders through our cash dividend a zero.
Speaker Change: 0.8 million was used for maintenance Capex.
Speaker Change: We paid first installments for all four new buildings amounting to <unk> 51, and a half million and we drew 25 million on the <unk> revolving credit facility to partly fund the installment together with our discretionary cash flow.
Laila Halvorsen: Further, 8.8 million was related to changes in working capital, and the quarter ended with 73 million in cash. Switching to capital allocation. DHT has a defined and predictable capital allocation policy, and in line with our policy, we will pay $0.27 per share as a quarterly cash dividend, which is equal to 100% of ordinary net income. The dividend will be payable on August 30th to shareholders of record as of August 23rd. This marks the 58th consecutive quarterly cash dividend, and the shares will trade ex-dividend from August 23rd.
Speaker Change: Further 8.8 million was related to changes in working capital on the culture and that winds down to 3 million in cash.
Speaker Change: Switching to capital allocation.
Speaker Change: Ph D has been defined and predictable capital allocation policy and in line with our policy, we will pay <unk> 27 per share.
The quarterly cash dividend, which is equal to 100% of ordinary net income.
Speaker Change: The dividend will be payable on August 30 to shareholders of record as of August 23rd.
Speaker Change: This marks the 58th consecutive quarterly cash dividend on the shares will trade ex dividend from August 22.
Laila Halvorsen: On the left side of this slide, we present an update on estimated P&L and cash break-even rates for 2024. P&L breakeven for the full year is estimated to be $27,700 per day for the fleet. While cash break-even is estimated to be $18,500 per day, resulting in $9,200 per day per ship in discretionary cash flow after dividends. So, assuming the vessels earn P&L breakeven, this means about $79 million in discretionary cash flow for the year.
Speaker Change: On the left.
Side of the slide we are present.
Speaker Change: With an estimated P&L and cash breakeven rates for 2024.
Speaker Change: P&L breakeven for the full year is estimated to $27700 per day for the fleet.
Speaker Change: Cash breakeven is estimated to 18000 per.
Speaker Change: Per day, resulting in $9200 per day per ship and discretionary cash flow after dividend.
Speaker Change: So assuming the vessel has their own opinion.
Speaker Change: Breakeven this means about 79 million and 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 one dollar and 97 cents per share.
Laila Halvorsen: 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 $1.97 per share. And with that, I will turn the call over to Svein.
find them: And with that I will turn the call over to find them.
find them: Thank you Rob.
Svein Harfjeld: Here is the updated outlook for the third quarter for the company. We have 552 time tracker days covered for the third quarter at $37,700. This rate assumes only the base rate for the two-time Ferto contracts that have profit-sharing features.
Findem: Hey, with the updated outlook for the third quarter for the company.
Findem: We have 552 time charter days cohort for the third quarter at 37700.
This rate assumes only the base rate for the two time charter contracts.
Speaker Change: Sharing features.
Svein Harfjeld: The forecast includes the time charter for DHT Europe, built in 2007, at 49,500 per day that commenced at the end of June. We expect to have 1,630 spot plays in this quarter, of which 75% have been booked at an average rate of 42,100. The current spot market is below this level, hence there is a risk that the average for the quarter will come down from this number. The spot P&L break-even for the quarter is estimated to be $23,600, a number that should assist you in estimating the net income contribution from our spot market.
Speaker Change: The forecast includes the time charter for the U S to Europe built 2007.
At 40.
Speaker Change: 500 per day that commenced at the end of June.
Speaker Change: We expect to have 1630 spoke pace in this quarter of which 75% have been booked to the average rates of 42100 <unk>.
Speaker Change: The current spot market is below this level and 30 service that the average for the quarter will come down from this number.
Speaker Change: This popular P&L breakeven for the quarter is estimated to be 23600, a number that should assist you in estimating the net income contribution from our spot fleet.
Svein Harfjeld: Here we present to you an update for our new building program. We have achieved meaningful improvements in the delivery schedules for all four shipments. The delivery schedule is now February, April, May, and July in 2016. This results in a significant increase in revenue days for the year. When compared to the schedules at the time of entering into the contract, we now expect the increase in revenue days to be in the range of 550 to 600 days for the year. As you will note, the ships and the constructions have all been allocated names.
Speaker Change: Every presented with an update for our new building program.
Speaker Change: We have achieved meaningful improvements in the delivery schedules for all four ships.
Speaker Change: The delivery schedule is now February April may and July in 2006.
Speaker Change: This results in a significant increase in revenue days for the year.
Speaker Change: When compared to the schedules at the time of entry and entering into the contract. We now expect the increase in revenue days to be in the range of 550 to 600 days for the year.
Speaker Change: As you will know the ships under construction have been all allocate that.
Speaker Change: <unk>.
Svein Harfjeld: As indicated during our previous earnings call, the options for additional ships were not declared and have, as such, expired. The advance schedule was made possible as certain projects for other ship types were revised at the shipyard. We are very pleased with this outcome and that our relationship to the arts resulted in us being afforded this priority.
Speaker Change: As indicated during our previous earnings call the op cost for additional fixed for not declared.
Speaker Change: Expired.
Speaker Change: Does it all schedule was made possible as circle perfect for older ship types have been revised at the shipyards.
Speaker Change: We are very pleased with this outcome and thats a relationship to the yard for the last being afforded this priority.
Okay.
Svein Harfjeld: The spot market is currently in a seasonal weak period. As many analysts and research reports are suggesting, we are now in the waiting game for refinery maintenance to complete and for runs to increase. On the graph to the left, you will see that seaborne transportation of crude oil hit about 41.7 million barrels per day in February and March this year. In the past two months, this has come down to about 40.3 million barrels per day, i.e.
Speaker Change: The spot market is currently in a seasonally weak period.
Speaker Change: As many analyst and research reports are suggesting we are now in a waiting game for refinery maintenance to complete overruns to increase.
Speaker Change: Yeah.
Speaker Change: On the graph to the left you will see the seaborne transportation of crude oil is about $41 7 million barrels per day in February and March this year.
Speaker Change: In the past few months this has come down about 43 million barrels per day.
Svein Harfjeld: down some 1.5 million barrels per day. As you will see in the graph to the right, this development resulted in inventory bills largely in April, and we understand in China particularly. This reversed in June and July as refiners started to draw on inventories, the key culprit behind the reduced demand for transportation. We believe the prior slide to jive well with this illustration.
Speaker Change: He is also one of the half million barrels per day.
Speaker Change: As you will see in the graph to the right. This development resulted in inventory built largely in April and we understand it.
Speaker Change: Particulars.
Speaker Change: This reversed in June and July as refineries started to draw in inventories in the key culprit behind the reduced demand for transportation.
Speaker Change: We believe the prior slide to drive well with this illustration.
Svein Harfjeld: On the left, you can note that refining margins softened during the second quarter. In the graph on the right, you can see that refiners built inventories of diesel and gasoline during the same period. The forward curve suggests that refining margins could improve and would offer an opportunity to reduce decent inventories. We think it is logical to assume that this will play out and that it will generate increased demand for crude oil feedstock and our services to rebuild crude oil inventories.
Speaker Change: On the left you can note that refining margins softened during the second quarter.
Speaker Change: In the graph on the right.
Speaker Change: You can see that refiners have built inventories of diesel and gasoline during the same period.
Speaker Change: The forward curve suggests that refining margins could improve and would offer an opportunity to reduce these inventories.
Speaker Change: We think it's logical to assume that this will play out and that it will generate increased demand for crude oil feedstock and our services to rebuilt crude oil inventories.
Svein Harfjeld: In general, our markets offer attractive fundamentals and prospects with continued oil demand growth, longer transportation distances, and a limited supply of new ships in combination with rapidly aging. Our strategic pillars remain disciplined execution. We believe we are well-structured for the markets we operate in, focusing on solid customer relations, offering safe and reliable services, supported by a solid balance sheet, strong liquidity, and robust break-even levels, all matched to a defined and shareholder-friendly dividend policy. With that, operator, over to you.
Speaker Change: In general our off from other markets offer attractive fundamentals, our prospects with continued oil demand growth longer transportation distances and a limited supply of new ships in combination with rapidly ATM fleet.
Speaker Change: Our strategic pillars remain with disciplined execution.
Speaker Change: We believe we are well structured for the markets, we operate in focusing on solving customer relations offering safe and reliable services supported by our solid balance sheet strong liquidity in the reverse break even levels all Max stocked at a defined and shareholder friendly dividend policy.
Speaker Change: And with that 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 Jon Chappell from Evercore ISI. Please go ahead; your line is open.
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 to withdraw. Your question. Please press star one on one a gallon.
Speaker Change: Please standby, while we compile the Q&A queue.
Jonathan Chappell: Thank you. Good afternoon.
Speaker Change: Yeah.
Speaker Change: Our first question comes from the line of Jon Chappell from Evercore ISI. Please go ahead. Your line is open.
Jonathan Chappell: Bit of a housekeeping one first. With the new accelerated schedule on the new buildings, what's the payment schedule look like between now and delivery? Any more payments this year and the, you know, the cadence for next year? And then also, is this all going to be cash funded, or do you plan on drawing down debt at delivery for the fall?
Speaker Change: Thank you and good luck.
Speaker Change: Afternoon.
Have a housekeeping one first with the new accelerated schedule on the new buildings, what's the payment schedule look like.
Speaker Change: Now in delivery anymore payments this year and the.
The cadence for next year and then also.
Speaker Change: Is this all going to be cash funded or do you plan on drawing down debt at delivery.
Laila Halvorsen: In our press release, I think under Note 5, we've included a table with future expected payments. So you see there that within the next 12 months, we expect payments of 89.9 million, and then the rest after that. We've looked into different financing projects, and we are very pleased with the suggestions.
Speaker Change: For the floor.
Speaker Change: Yes so.
Speaker Change: In our press release I think under five.
Speaker Change: Within created.
Speaker Change: Table.
Speaker Change: Future expected payments. So you see there that within the next 12 months, we expect payments of 89 9 million.
Jonathan Chappell: Okay, and then if I may just add to that.
Speaker Change: And then the rest are.
Speaker Change: After after that.
Speaker Change: We've looked into different financing projects.
Speaker Change: We are very pleased with that.
Speaker Change: Suggestions that we have but nothing is.
Speaker Change: Decided yet so we will get back to you with that.
Speaker Change: Once we have finalized.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: If I just may add to that Joe is that there.
Speaker Change: There is of course on timing differences when we generate the cash flow therefore.
Speaker Change: For the equity component of these ships.
Speaker Change: So the handset sort of on time from time to time, Golar, Icf's, and then generate cash flow and back and forth on that so that's why this happened during this quarter and this past quarter.
Svein Harfjeld: Have you had any interest at this point in delivery now within the next 24 months on time charters, or do you just assume that those would be implemented in the spot market upon delivery?
Have you had any interest at this point.
Speaker Change: With delivery now within the next 24 months on.
Speaker Change: <unk> charters or do you just assume that those would be implemented in the spot market upon delivery.
Jonathan Chappell: There is some initial interest, but I would say it's not at the level that sort of provides for negotiations. So we have an intention and interest in seeing if we can develop this. I think it will take a bit of time, and it's probably a next year event if we decide to pursue that. So we have, you know, it is our ambition to build more long-term and fixed income for the company in general, and these ships will offer some very interesting opportunities for a couple or three clients in particular that have shown interest.
Speaker Change: There is some initial interest, but I would say, it's not at the level that sort of provides for negotiations. So we.
Speaker Change: We have in Texas first and seeing if we can develop is I think it will take a bit of time and it's probably a next year event.
Speaker Change: If we decide to pursue that.
Speaker Change: No.
Speaker Change: It is our ambition to build more long term fixed income for the company in general.
These ships will offer some very interesting opportunities for <unk>.
Speaker Change: A couple of three clients in particular that controlling interest.
Svein Harfjeld: Okay. And then finally, Svein, you know, the seasonality makes sense. We've all seen it, several years, third quarters, weakest. Maybe this time though, you know, there's some concerns about China as being the biggest end market for crude long-haul deliveries and some potential weakness there. Have you seen any signs that maybe China is weakening, and it's a bit more beyond seasonality, there's some cyclical component to it, or do you truly just think it's a function of, you know, refinery shutdowns at this time of year?
Speaker Change: Okay.
And then finally fine.
Speaker Change: The seasonality makes sense all seen it several years third quarters weakest.
Speaker Change: Maybe this time, though there are some concerns about China as being the biggest end market for crude long haul deliveries in some potential weakness there have you seen any signs that maybe China is weakening and it's a bit more beyond seasonality. There is some cyclical component to it.
Speaker Change: Or are you truly just think it's a function of.
Speaker Change: Finally shutdowns at this time of year.
Svein Harfjeld: I think there's a bit of both. We've seen some developments in that heavy trucking is starting to use LNG as fuel. And LNG or, you know, heavy transportation in general in Asia has been a meaningful contributor to the amount of growth in general. So this is something to watch.
Speaker Change: I think the better.
Speaker Change: Both we have seen some.
Speaker Change: Development in the heavy trucking is starting to implement LNG as fuel.
Speaker Change: The LNG or heavy transportation in general in Asia has been a meaningful contributor to the model growth in general.
Speaker Change: So this is something to watch.
Svein Harfjeld: You know, on the positive side, there is meaningful growth in the pet care industry, which is, I guess, a reflection of policy in China that they want to focus more on a consuming industry. And the new refining capacity coming on in China accounts for upwards to 80% of pet care output, of which the predominant part is crude oil based. But this is not happening right now. This is something we will see developing now over the next, I would say, 12 to 24 months.
Speaker Change: On the positive side.
Speaker Change: There is meaningful growth in the pet Chem industry, which is I guess that reflects slow policy in China that they want to focus more of them are consuming industry.
Speaker Change: The new refining capacity coming on in China has around upwards to 80% of our pet care multicolor outfit or which the predominant parties crude oil based.
Speaker Change: This is not happening right now this is something we will see developing over the next I would say 12 to 24 months. So there is some change in you know where the oil is going or what is good. The order is being used for if you like Canada.
Svein Harfjeld: So there is some, you know, change in where the oil is going or what's good the oil is being used for, if you like, and I guess the negative components have come earlier than when the positive components will come into the market. So that's probably amplified a bit the seasonality this summer.
Speaker Change: Yeah.
Speaker Change: I guess the negative component has come earlier than when the positive components to a or come into the market. So that's probably amplified a bit.
Speaker Change: Seasonality for this summer.
Jonathan Chappell: Okay, thanks for the time.
Speaker Change: Okay.
Speaker Change: For the time.
Speaker Change: Thank you.
Operator: We'll now move on to our next question. Our next question comes from the line of Frode Morkedal from Clarkson Securities. Please go ahead; your line is open.
Speaker Change: We'll now move on to our next question.
Speaker Change: Our next question comes from the line of <unk> from Clarksons <unk> Securities. Please go ahead. Your line is open.
Speaker Change: Thank you.
Speaker Change: I thought.
Speaker Change: Okay.
Frode Morkedal: Regarding the new bid options, it's the decision not to exercise them due to the fact that it could impact the ability to pay 100% of earnings in dividends, or is it a view on..., on the new bid prices themselves. Well, you know, if...
Speaker Change: Regarding the new adoptions.
Speaker Change: Decision to not exercise.
Speaker Change: Due to the fact that it could impact that.
Speaker Change: 100% earnings and dividend.
Speaker Change: And then EBIT processes themselves.
Svein Harfjeld: Well, you know, if we had declared those options, it would be a meaningful increase in capex, of course, and that would also change the structure of our balance sheet considerably. And we had no desire to do that, so the core plan was all along to do the four ships, with a caveat that if we had had some early interest to develop two long-term charters, say, seven, eight years or longer, if that had happened earlier, and we could develop some particular financing for that, that's something we might have considered for one, two, or all four ships. But that did not materialize, so we felt it So yeah, that's the short story, I guess.
Speaker Change: Well.
Speaker Change: If we had the caito food it would be.
Speaker Change: The anemia meaningfully increasing capex of course and that could also change the structure of our balance sheet considerably.
Speaker Change: We have no desire to do that so the core plan all along to do the four ships.
With the caveat that if we have had some early interest to develop through long term charters say seven eight years or longer if that had happened earlier.
Speaker Change: There are lots of them, particularly financing for us that's something we might have considered for one two or all four ships.
Speaker Change: With local materialized, so we felt it.
Speaker Change: When prudent to do the four ships, so I'd be very happy with that.
Speaker Change: So the short story I guess.
Speaker Change: Okay.
Speaker Change: Makes sense.
Frode Morkedal: My next question is about the market. I guess there's been some talk about the VLCCs cleaning up to do CPP cargoes. What's the magnitude of that activity? And is that something you're also doing, and it's mostly Sirius Maxis.
Speaker Change:
Speaker Change: Our next question.
Speaker Change: About the market I guess theres been some talk about.
Speaker Change: Cleaning up to do the CPP cargos.
Speaker Change: What's the magnitude of that activity.
Speaker Change: Is that something you're also considered.
Svein Harfjeld: and It's mostly serious Maxis. We think maybe around 20 that have already done that. There have been some VCC cargoes, we think about a handful, and you know, ideally, it should coincide with that you have a relatively modern ship that is then going to dry dock, and in, you know, when that happens, you also clean up the ship, you know, sort of beyond the conventional dry dock work. It will take quite a few extra days, probably 20 days, I would say, and it will have some cost, a few hundred thousand dollars, depending on the ship and that ship's prior cargo history and things like that.
Speaker Change: It's mostly a suezmax is we think maybe around 12 peers have done that.
Speaker Change: Yes.
Speaker Change: There has been some VLCC cargoes.
Speaker Change: Think about the handful.
Speaker Change: Ideally it should coincide with that you have a relatively modern ship.
Speaker Change: Going through dry dock.
Speaker Change: And.
Speaker Change: Sure.
Speaker Change: So when that happens that too also clean up the ship.
Speaker Change: Sort of beyond the conventional dry dock work.
Speaker Change: It will take quite a few extra days, probably 'twenty I would say.
It will have some cost a few hundred thousand dollars depending on the ship.
Listen that chipset prior cargo history and things like that.
Svein Harfjeld: And there was an opportunity now with sort of arbitrage pricing on products, as well as the lower cost of ships. So we have done this in the past. We did not have any ships that were sort of suited at this point for this business opportunity, but it's not an unknown territory for DHT. So we guessed probably five ships, maybe six, and that's about it.
Speaker Change: So.
Speaker Change: And there was an opportunity now.
Speaker Change: With.
Speaker Change: Sort of arbitrage pricing on products as well as the lower cost of ships. So we have done this in the past.
Speaker Change: We did not have any ships that first of all suited at this point.
Speaker Change: For these business opportunities, but there is no pattern.
Speaker Change: On the territory for DHT.
Speaker Change: We began probably five six maybe six.
Speaker Change: And that's about it.
Speaker Change: Okay. That's interesting thank you.
Sure.
Speaker Change: Thank you.
Speaker Change: We will now move on to our next question.
Speaker Change: Yeah.
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.
Speaker Change: Our next question comes from the line of Oman Noxa from Jefferies. Please go ahead. Your line is open.
Omar Nokta: Thank you, Svein. I just want to follow up really quickly on the last question from Frode about the VLCCs and the potential for carrying clean cargoes. You mentioned that it's typically done before the vessel is going into dry dock. Is that basically, would this be just one cargo that they're able to do and then go into dry dock, or can it carry a series of cargoes?
Oman Noxa: Thank you.
Oman Noxa: I just wanted to follow up really quickly on the.
The last question from Proto about the VLCC from a potential carrying the clean cargos.
Oman Noxa: You mentioned that it's typically done before the vessels going into dry dock is that basically will just be just one cargo that theyre able to do and then go to dry dock or can it do a series of cargos.
Svein Harfjeld: It's done in connection with the dry dock, so that you clean up, and then when you load the refined product, these cargoes are typically going to the Atlantic basin, and quite a lot of them have gone to Africa. You tend to be lying or storing the cargo for a while before you are able to unload, so that's not a positive because you are a freshly painted vessel, and you tend to get some hull growth after this, but of course, the charter rates are at a premium compared to the general market, so that I guess compensates for some of that.
Speaker Change: It was done in connection with the dry dock so that cleanup.
Speaker Change: And then you know the refining product.
Speaker Change: These cargoes are typically are typically going to the Atlantic basin.
Speaker Change: All of them have gone.
Speaker Change: Africa.
Speaker Change: You tend to be like.
Speaker Change: <unk> or <unk>.
Speaker Change: Storing the cargo for a while before you are able to unload so that's sort of.
Speaker Change: You could say not that positive because you are a freshly painted the vessel.
Speaker Change: And to get some growth after this.
Speaker Change: But of course to the charter rates are at a premium to the general market. So thats I guess compensates for some of that.
Svein Harfjeld: Then there are some detailed nuances on risk with contamination and decolorization and things like that, to what extent you can transfer some of that risk to the counterparty and what not. But it is really for one cargo unless, after discharge, say, in the Atlantic Basin, you decide to balance back to try to do a second cargo, but that is normally not done, and ships view this as a sort of repositioning of the dry log into the Atlantic Basin and then trade the cargoes loaded in USGO for Brazil and West Africa.
Omar Nokta: Okay, I got it. Thanks for that.
Speaker Change: And there are some decent unisys on risk with contamination in the equalization and things like that to what extent do you can transfer some of that risk to the counterparty.
Speaker Change: And local but it is really for one cargo unless you off the discharge say in the Atlantic Basin.
Speaker Change: Decides to ballast back to try to do the second cargo, but that is normally in lockdown and ships view. The assess this repositioning of the dry dock into that big base and to then train the cargos loaded in years ago for Brazil, and West Africa.
Omar Nokta: And then just wanted to ask, maybe we were discussing earlier the seasonality aspect, and it comes every year, and you have the chart that shows the pickup. I guess I wanted to ask, maybe bigger picture, it feels like we're in this pattern of OPEC constantly needing to revisit its production levels. And maybe we're looking at a situation where flat production from OPEC is the best case, and they're constantly perhaps having to cut.
Speaker Change: Okay got it thanks for that.
Speaker Change: And then just wanted to ask maybe you were discussing earlier the seasonality aspect. When it comes every year and we'll have the chocolate shows that the pick up I guess I wanted to ask maybe bigger picture what feels like we are in this pattern of OPEC constantly needing to rebuild that its production levels.
Speaker Change: And maybe where we're looking at a situation were flat production from all parties best case.
Speaker Change: And they are constantly perhaps having to cut and thats not necessarily because of demand, but it's the fact that you have so much non OPEC production growth.
Omar Nokta: And that's not necessarily because of demand, but it's the fact that you have so much non-OPEC production growth. I guess, how do you think the VLCCs will continue to fare in this type of market? If we were to think about the dynamic here over the next, say, six to 18 months, where OPEC is flat to down, but then you've got the Atlantic that's growing, how do you think VLCCs will fare in this type of market? I think that
Speaker Change: How do you think.
Speaker Change: <unk> will continue to far in this type of market. If we were to think about that.
Speaker Change: Dynamic here from roughly six to 18 months, where opex is flat to down.
Speaker Change: But then you've got the Atlantic that's growing.
Speaker Change: How do you think Vlccs fair in this type of market.
Svein Harfjeld: I think that would be positive, so the Atlantic barrels out to Asia are truly a VSEC business, and it's impossible, really, for SUSE Max to compete in freight terms on that.
Speaker Change: I think that could be a positive.
The Atlantic barrels <unk>.
Truly a VLCC business.
Speaker Change: It's impossible really for Suezmax to compete in freight terms on that.
Svein Harfjeld: So, I would say that's a positive. I think it's an opaque market that at some point now decides to release barrels to the market. It's because there is two evidence of man growth also so that those barrels can come to the market without necessarily rocking the oil price, the sort of zip code. So, I think I always thought that opaque or salient particular clear, you know, objective or managing price more than anything.
Speaker Change: So.
Speaker Change: So I would say that as a positive.
Speaker Change: Thank you.
Speaker Change: Opex is homework now decides to release barrels to the market is because there is clear evidence of the mall.
Speaker Change: <unk> growth also so that those barrels can come to the market without necessarily rocking the oil price sort of Zip code. So.
Speaker Change: I think I always thought that OPEC or Saudi in particular clear objective of managing price more than anything and that is precious to them.
Omar Nokta: Okay, yeah, and then just the final one, Svein. The TMX has been ramping up, and it looks like we're almost at a, not necessarily a run rate, but looks like a good number of AFRMAXs are loading, perhaps somewhat consistently out of the Vancouver region. Has there been any settlement of how these cargos are being directed? You know, obviously, it's the AFRs that are loading at the port, but, you know, is reverse slidering onto the OCCs becoming a standard thing? And is that also something that maybe will move the needle on the OCCs, just perhaps not visible now because of the summer? Yes, it's already in the-
Speaker Change: Okay.
And then just the final one is volume.
Speaker Change: Cemex has been ramping up and it looks like we're almost up.
Speaker Change: Not necessarily run rate, but looks like a good number of aframax is our loading perhaps somewhat consistently Vancouver region has there been any settling of how these cargoes are being directed obviously is the efforts that are loading at the core.
Speaker Change: Reverse lighters onto VLCC is becoming a standard.
Speaker Change: And is that also something that maybe will move the needle on vlccs, just perhaps not physical now because of.
Svein Harfjeld: Yes, there's already been a number of cargoes where the Afro-Maxis have been heading south, to California or even further south, to PAL, and there's been then reverse latching onto these for those ships that go predominantly to China. There's also been, I think, one cargo to India. And the sort of freight cost of that is meaningfully cheaper than sending an AFROMAX directly from the Vancouver area to China because those AFROMAXes will also not be fully loaded due to drought restrictions. So we think that this is a new trade that will evolve for these on top of what else is going on.
Speaker Change: While summer.
Speaker Change: Yes, there are already a number of cargos.
Speaker Change: Access has been heading south.
Speaker Change: Florida, or even further south to Pal.
Speaker Change: And Theres been then reverse latching onto these for those ships then go predominantly to China. There's also been I think well cargo to India.
Speaker Change: Sort of a freight cost of that.
Speaker Change: It meaningfully cheaper than sending an aframax directly from the Vancouver area over to China. Because also of those efforts will not be fully loaded due to drought restrictions.
Speaker Change: So we think that is.
Speaker Change: <unk> is a new trade that will evolve for these top.
Speaker Change: What else is going on.
Speaker Change: Yeah.
Omar Nokta: Okay. All right. Thank you. That's it for me.
Speaker Change: Okay.
Speaker Change: Okay Alright.
Speaker Change: Thank you that's it for me.
Speaker Change: Thank you.
Operator: There are no further audio questions at this time, so I will hand the call back to Svein Moksis Harfjeld for any closing remarks.
Speaker Change: There are no further audio questions at this time, so I'll hand, the call back to spine Marxist hartsdale for any closing remarks.
Svein Harfjeld: Thank you to all for staying interested and tuned in to DHT, and we wish you all a good day ahead.
Speaker Change: Thank you to all for staying interested in tuned into <unk>, we feel good at.
Speaker Change: Have a good one.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect speakers. Please standby.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Svein Harfjeld: And that is pressure on them. So, I think that's a positive. So, I think that's a positive. So, I think that's a positive.