DHT Q4 2024 Earnings Report

DHT EPS Results

• Actual EPS: $0.34
• Consensus EPS: $0.22
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: N/A

DHT Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $90.09 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

DHT Announcement Details

• Quarter: Q4 2024
• Date: 2/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 8:00AM ET

DHT (NYSE:DHT), through its subsidiaries, owns and operates crude oil tankers primarily in Monaco, Singapore, and Norway. The company also offers technical management services. As of March 15, 2024, it had a fleet of 24 very large crude carriers. The company was incorporated in 2005 and is headquartered in Hamilton, Bermuda.

DHT Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Q4 '20 '20 '4 DHT Holdings Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Leila Halvorsen. Please go ahead.

[Laila Halvorsen, CFO at DHT]

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' fourth quarter twenty twenty four earnings call. I am joined by DHT's President and CEO, Svein Mokhtnais Scharfje. As usual, we will go through the financials and some highlights before we open up for your questions.

[Laila Halvorsen, CFO at DHT]

The link to the slide deck can be found on our website, thtankers.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, thtankers.com, until February 13. In addition, our earnings press release will be available on our website and on the SSC's escrow system as an exhibit to our Form six K. As a reminder, on this conference call, we will discuss matters that are forward looking in nature.

[Laila Halvorsen, CFO at DHT]

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 on the SSC EDCO system, including the risk factors in these reports for more information regarding risks that we face. As usual, we will start the presentation with some financial highlights. We continue to show a very strong balance sheet with low leverage and significant liquidity.

[Laila Halvorsen, CFO at DHT]

The fourth quarter ended with total liquidity of $2.50 $58,000,000 consisting of $78,000,000 in cash and $180,000,000 available under our revolving credit facilities. At quarter end, financial leverage was 18% based on market values for the ships and net debt was $13,800,000 per vessel, well below estimated residual ship values. Now over to the P and L. We achieved revenues on TC basis of $85,500,000 and EBITDA of $60,600,000 for the fourth quarter. Net income came in at $54,700,000 equal to 0.34 per share.

[Laila Halvorsen, CFO at DHT]

After adjusting for a noncash reversal of prior impairment charges of $27,900,000 net income came in at $26,800,000 equal to $0.17 per share. Vessel operating expenses for the quarter were 20,000,000 and G and A for the quarter was $5,600,000 of which the latter included a nonrecurring item of $700,000 For the fourth quarter, the average TCE for all the vessels in the spot market was $38,200 per day, while the spot vessels under 15 years of age achieved earnings of $40,500 per day. The vessels on time charter also made $40,500 per day, while the average combined TCE achieved for the quarter was $38,800 per day. Net income for the full year of 2024 was $181,500,000 equal to $1.12 per share. Adjusted for the noncash reversal of prior impairment charges booked in the fourth quarter of twenty seven point nine million dollars net income for 2024 came in at $153,600,000 equal to $0.95 per share, yet another strong year for THD.

[Laila Halvorsen, CFO at DHT]

Vessel operating expenses for 2024 were $78,600,000 which includes a non occurring insurance deductible. And G and A for 2024 was $18,900,000 We estimate G and A for 2025 to be about $18,000,000 equal to an average quarterly run rate of $4,500,000 Depreciation for 2024 was $111,900,000 and based on our current fleet, we estimate our annual depreciation for 2024 to be about $110,000,000 For 2024, our spot vessels achieved 47,200 per day, while the average combined TC came in at $45,200 per day. The spot vessels under 15 years of age achieved earnings of $49,800 per day for the full year of 2024. On this slide, we present the cash flow highlights for the fourth quarter. We started the quarter with $74,000,000 in cash, and we generated $60,600,000 in EBITDA.

[Laila Halvorsen, CFO at DHT]

Ordinary debt repayment and cash interest amounted to $15,100,000 30 5 point 5 million dollars was allocated to shareholders through a cash dividend and $13,200,000 was used for share buybacks. $12,900,000 was used for our newbuilding program, while $10,000,000 was drawn under our available RCF. Positive changes in working capital amounted to 9,300,000 and the quarter ended with $78,000,000 in cash. And with that, I will turn the call over to Svein.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you, Laila. We'll talk about our business update. So during December, we took advantage of the soft period in the capital markets to repurchase our own shares to the tune of 1,500,000.0 shares, just shy of 1% of the company. The average price was $8.89 almost $3 lower than yesterday's closing price and accretive to earnings per share and net asset value by a good margin. We entered into agreement to sell our oldest ship, the DHT Scandinavia, built in 02/2006 for a price of $43,400,000 The vessel was debt free, and we expect the sale to generate a book gain of about $19,800,000 The cash proceeds will be allocated to general corporate purposes here under investments in vessels, share buybacks and prepayment for debt.

[Svein Moxnes Harfjeld, President & CEO at DHT]

The vessel was delivered to our new owners during January. During the quarter, we paid $12,800,000 in installments under our newbuilding program, taking total installments during 2024 to $90,100,000 Subsequent to the quarter, we secured a one year time charter for DST China Bill 2,007 at $40,000 per day. The contract commenced towards the January. On this slide, we will discuss capital allocation and dividend specifically. The dividend for the fourth quarter of twenty twenty four is declared at $0.17 per share.

[Svein Moxnes Harfjeld, President & CEO at DHT]

This is as per our capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends and marks our sixtieth consecutive quarterly cash dividend. The shares will trade ex dividend on February 18, and the dividend will be paid on February 25. In the graph to the left, we update our estimated P and L and cash breakeven levels for 2025. As you will see, the difference between the two is estimated at $7,000 per day for the year. This discretionary cash flow will remain in the company and be allocated to general corporate purposes with the intention being to fund installments under our newbuilding program.

[Svein Moxnes Harfjeld, President & CEO at DHT]

The graph on the right illustrates the accumulated dividend since updating our capital allocation policy from the third quarter of twenty twenty two. The accumulated amount is $2.36 per share and reflects well during a period in which our share price has appreciated and we made share buybacks totaling $32,000,000 equal to 2.3% of the company. We will now discuss the bookings to date for the first quarter of twenty twenty five. We expect to have six zero four times charter days covered for the first quarter at 41,700 per day, a marginal improvement when compared to the prior quarter. This rate assumes only the base rate for February and March for the time charter contract that has profit sharing feature.

[Svein Moxnes Harfjeld, President & CEO at DHT]

We assume fourteen seventy five spot days in the quarter, of which 74% have been booked at an average rate of 36,400. Our ships that are younger than 15 years of age have been booked at 37,100 per day. You will note that we have improved the rates on the bookings when compared to our business update of January 5. The current spot market for modern vessels with exhaust gas cleaning systems are in the $55,000 to $60,000 range. The spot P and L breakeven for the quarter is estimated to be $21,700 per day, a number you might use to estimate the net income contribution from our spot fleet for the first quarter.

[Svein Moxnes Harfjeld, President & CEO at DHT]

We believe our market is increasingly becoming a highly constructive supply story. Here we illustrate the demographics of the VLCC fleet. Maybe not news to many of you, but nevertheless, we think it's important to reinforce the obvious, which is that the VLCC fleet is set to shrink and at a time when demand for our services is growing. By the end of twenty twenty six, we estimate four forty four VLCCs to be older than 15 years of age. At the same point in time, two zero two are estimated to be older than 20 years and 184 to be older than 25 years.

[Svein Moxnes Harfjeld, President & CEO at DHT]

These are staggering numbers and will increasingly support our business. In the same context, we estimate almost 200 VLCCs to belong to the so called Shadow fleet. Following the recent additional sanctions, 97 VLCCs are now sanctioned, making it harder for these vessels to operate and serve a purpose. For avoidance of doubt, these vessels are mostly in the older end of the sailing fleet, hence included in the prior stated fleet demographics. The order book for new lease seats is benign with about 9.3% of capacity on order.

[Svein Moxnes Harfjeld, President & CEO at DHT]

There will be five ships delivered this year, 24 in '26, '40 '4 in '27 and fourteen estimated for '28. Next slide here, we will give some general market commentary. The U. S. Is actively announcing sanctions and tariffs.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Some will have limited impact on our market, but some could be of significant support to freight rates. Overall, we expect sanctions and tariffs to somewhat disrupt trade, but in contrast to the impacts from the Russia Ukraine conflict, we expect the ELCs to be in high demand. Sanctions and fiscal issues with some of the teapot refinery industry in China is resulting in changed procurement behavior of crude oil as state owned refiners are increasingly taking a prominent role, which likely result in a reduced role for the shadow fleets. China has announced supportive fiscal policy measures and stimuli, which we assume will drive increased economic activity and consumption. This combined with net new refining capacity coming on stream should result in some 300,000 barrels per day increased demand for 2025.

[Svein Moxnes Harfjeld, President & CEO at DHT]

We further note that refining margins in China has lately improved, signaling a successful reduction in inventories and increased economic activity. As mentioned in the business outlook, the spot market for modern leaf with exhaust gas cleaning systems are now in the $55,000 to $60,000 a day range with good support and a possibly continued upward trajectory. There is significant interest from customers for time charter contracts, reflecting an aligned view that the market is fast becoming tighter as the modern and compliant fleet is set to shrink over the next few years. Based on positive feedback and encouragement from our key stakeholders, namely shareholders, customers and lending banks, we believe we have an appropriate strategy tailored to the structure of our market, focusing on solid customer relations, offering safe and reliable services, maintaining a competitive cost structure with robust breakeven levels, a solid balance sheet and a clear capital allocation policy. The whole DST team appreciates this encouragement and continues to work hard and operate with leading governance standards on a high level of integrity.

[Svein Moxnes Harfjeld, President & CEO at DHT]

And operator, over to you.

[Operator]

Thank you. Thank you. We will start with our first question. This is from the line of John Chappell from Evercore ISI. Please go ahead.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Thank you. That's fine.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Hi, John.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

So since the last call, when I asked about kind of fleet development, you've sold to Scandinavia and then you locked into China. So it seems like you're derisking some of the older vessels in your fleet. As we think about going forward, the differences now, and maybe the optimism around asset values and time charter market,

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

What do you think is

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

the best path forward for again kind of the older ships in your fleet where maybe you don't need as much spot exposure? Is monetizing them a better alternative versus the time charter market or vice versa?

[Svein Moxnes Harfjeld, President & CEO at DHT]

So two of we have now three ships built in 02/2007 in our fleet. Two of them are on time charter, one which we talked about on this call, dollars 40,000 a day for this year and one that started in last summer, which is ending end of second quarter at $49,500 per day. So these are two very good time charters. The third vessel is in the spot market. So we might consider to divest one or two other ships depending on time and price, obviously.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So the two on time charter will continue to operate at least through their charters. But they also these ships have basically no debt. So there is sort of an interesting opportunity in a way to monetize that in a way and then reinvest the money in the company in or one way or another in the line with sort of our capital allocation policies in general. So that's really all I can say now, but it's not that easy to sell all the ships. You might have an interest, but it might be a counterpart that you cannot transact with also.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So that sort of raises the hurdle a bit to get it done.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Right. Yes, that makes sense. And then as far as the newbuilds are concerned, seeing the progress payments and what's laid out for the next twelve months and you still have some time. But what was the what's kind of the model financing plan for those ships, number one? And number two, just given the fuel efficiencies of them, etcetera, have you received any interest thus far on potentially locking those in?

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Or is the plan to keep them kind of the optionality of using the spot market next year?

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you. So the base case to for debt financing those ships is $60,000,000 per vessel, But the chances are we might up that somewhat, and that's based on the sort of negotiations we have now on the financing that's intended to put in place. So if we finance more than the $60,000,000 we will then reallocate how the debt is distributed in the fleet potentially. So it should be sort of a very good outcome for the company. And we are quite excited about the terms and the commercial pricing of what we expect to put in place.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Our target is to close this at some point in the second quarter of the year. So in general, we have great support from our banking group and have several sort of proposals on the table. Your next question was on the fuel efficiency of these ships and whether we have received any interest. So in general, there is significant interest for time charters. There are two clients in particular that have showed interest in the newbuildings, but it's too early to say whether this is something we can execute on.

[Svein Moxnes Harfjeld, President & CEO at DHT]

As normal, there's always a bit of a delta between what the customer wants and what we want. So but I think with a tailwind from the spot market going forward now, it should be possible to get to something that could make very good both commercial and financial sense for DHT.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Great. Thank you, Saad.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you.

[Operator]

Thank you. We'll now take our next question. This is from the line of Frode Markedahl from Clarksons Securities. Please go ahead.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Hello. I think your line is not the best. Yes, now I can hear you.

[Frode Mørkedal, Senior Equity Analyst at Clarksons Platou Securities]

Okay, perfect. First question, can you just talk about the recent jump in VLCC spot rates? And yes, whether you think these levels are sustainable? What's driving the strength? And how do you see the market developing from here?

[Svein Moxnes Harfjeld, President & CEO at DHT]

I think the market in general is very, very tight. And this sort of downward trajectory we had in the end of last year was mostly driven by some inventory changes and the lack of runs in the refineries in China. But that those inventories seem to sort of be worked off as you can now see on the refining margins in China. So that's one aspect. The other is, as I mentioned, the market is tightly balanced, and it didn't take much to bring the market down in one way.

[Svein Moxnes Harfjeld, President & CEO at DHT]

But more importantly, it didn't take much to bring the market up. So the sentiment in particular in the reaction to sanctions was very dramatic. The market moved very, very fast without necessarily more cargos in the market, but just on expectations. We We had a little bit of a setback, but then we are back up again. And then now we feel that there's more substance and that there's more cargo in the market.

[Svein Moxnes Harfjeld, President & CEO at DHT]

At the same time, as I talked about in detail, the fleet is really, really getting tighter and tighter, and there's so many pieces to the puzzle now. It's a bit hard to be precise on which component is the driving factor. And I prefer to look at it more like the tipping point at the glass at some point is just full, right? And it's flowing over it's overflowing. So and in a way, that's what we I think we are seeing potentially the beginning of.

[Frode Mørkedal, Senior Equity Analyst at Clarksons Platou Securities]

That's good to hear. Next is on the capital allocation. You talked about it, I guess, but you sold the ship in December and you sparked all the proceeds to buy back shares at very attractive levels, I would say. So that made a lot of sense. But of course, now the stock is back to your onetime NAV more or less.

[Frode Mørkedal, Senior Equity Analyst at Clarksons Platou Securities]

So the question is do you see better opportunities elsewhere like secondhand vessel transactions? Or are buybacks still on the table?

[Svein Moxnes Harfjeld, President & CEO at DHT]

So I think just to clarify, the buybacks we did in December, they were done with the resources at hand. They were not dependent on us selling the ship. We felt there was a dislocation in the capital markets compared to the underlying dynamics of our business. So when we traded below $9, we were acting on that. And I think in hindsight, that proved to be a very good decision.

[Svein Moxnes Harfjeld, President & CEO at DHT]

As we also then stated, so we had three purposes for the cash proceeds from the sale of Scandinavia. It's either vessel acquisitions, as you asked about, buybacks or debt prepayments. Where the share price is pricing now, we are normally not buying back stock. We are always on the lookout for good investment opportunities in ships, but they are hard to find, frankly, as the number of sort of aspect that has to be met in terms of age, ship design, delivery, etcetera, and price, of course. So but we have the capacity financially to do that if we want to.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Then lastly, of course, then is debt prepayments that would reduce interest expense in the company. And it's a detailed question of whether we then increase our RCF capacity, so we can access the funds to other activities later if we want to or as we've done many times in the past, focus the prepayments on taking out installments or AMOC over certain periods. So we are yet to finally decide on that, and we'll maybe be more clarity on that when we present our first quarter earnings.

[Frode Mørkedal, Senior Equity Analyst at Clarksons Platou Securities]

Okay, great. That's clear. Thank you.

[Operator]

Thank you. We'll now take the next question. This is from Omar Nochtar from Jefferies. Please go ahead.

[Omar Nokta, Managing Director at Jefferies LLC]

Thank you. Hi, Svine. Good afternoon. Just had a follow-up on Frodo's first question. You're talking about the deals to see rates basically jumping here over the past maybe four or five weeks to $55,000 to $60,000 range as you outlined.

[Omar Nokta, Managing Director at Jefferies LLC]

You mentioned that a big reason for that has been sentiment and then also just the fact that there's more cargo. What about in terms of just the actual sanctions themselves? Part of it obviously sentiment, but have we seen an effect of that yet on rates as in we're seeing shifts removed from service and that's partially why rates are rising or is that not even yet taken place?

[Svein Moxnes Harfjeld, President & CEO at DHT]

I think you're right in saying that the primary driver at this early phase has been sentiment. But we are seeing, as I alluded to here, some change in behavior in China in how they procure oil, I. E. That means from whom or from which countries, and that also will relate to how it's going to be transported. So there were sanctions that you might have seen for the Shandong sort of refinery complexes, which meant that ports could not take in ships that were sanctioned.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So that is a real thing. Secondly, we understand that there are some tax issues with several of these refiners. That means that they will either face bankruptcy or transfer ownership to maybe state owned entities. And this is already changing or driving the way oil is being and the early innings I think of what's at play here going forward.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. Thank you. And then just a second question just on Slide 10 where you outlined the VLCC fleet and how it's developing. The shadow fleet, you have the 105 and then you have the 92 that are sanctioned. Any sense are you able to see what say the shadow fleet is trading, those 105 VLCCs, how they're trading today's market and then also what the other 92 are doing?

[Svein Moxnes Harfjeld, President & CEO at DHT]

It's hard because there's no AISs to track, right? So it has to be sort of physically seen or through satellite images. And you need to be live on this, and this is not the task for DHT to do in detail. But I think for one, this fleet is very inefficient. So and with that, I don't think we should assume sort of a one for one change.

[Svein Moxnes Harfjeld, President & CEO at DHT]

If sanction barrel or sanction shift is shifting to a non sanctioned barrel, there will be more efficiency out of that. Exact ratio is hard to be specific on, but the compliance fleet obviously is more efficient or more productive, if you like. So but again, I just if you look at just the gradual shift now in sort of the gravity, and we also seen reports of some of these ships now being sold for demolition early on. And we understand there are other discussions with brokers or breakers for some additional ships. So I think the EHT stated earlier on that we looked at this shadow fleet as sort of the new scrapping in waiting until actual scrapping takes place and that might be the case now.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. And maybe just sorry, one final one just on just looking at the table. At the end of next year, they'll have you'll have 184 VLCCs in the fleet that are twenty five years or older. Can you envision those ships sticking around once they hit that age

[Omar Nokta, Managing Director at Jefferies LLC]

or they scrap?

[Svein Moxnes Harfjeld, President & CEO at DHT]

No, you have to have a trade where actually it's commercially possible to do it. And keep in mind one thing, it's not just whether the customer using the ship can say, I'm okay with a 25 year old ship, but you cannot nominate that ship to lift the cargo from, say, Saudi Arabia or from ports in West Africa or U. S. Or whatnot because the terminals will not accept most of these ships. And it's the same in most discharge ports where approval by the receiving facilities is also part of getting a deal done on the cargo.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So all of this is just becoming very, very difficult. I have a very hard time to think that there are any commercial opportunities for these ships, maybe with a few exceptions, but the majority I think will be out of business.

[Omar Nokta, Managing Director at Jefferies LLC]

Okay. All right. Well, very good. Thank you, Svein.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you, Omar.

[Operator]

Thank you. Your next question is from the line of Peter Haugen from ABG Sandal Collier. Please go ahead.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

Good afternoon, Svein. A quick question on prices. As we've spoken about now on the rate side, it's been lots of volatility. But in terms of the quoted prices for at least newer ELSI C tonnage, nothing much has really changed over the past two or the past months. If you were to sell a or buy, so what I guess I'm asking is the price of in the next transaction of a newer VLCC.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

So a resale VLCC, what would that transact that today, I think, if it were to happen?

[Svein Moxnes Harfjeld, President & CEO at DHT]

So So when you say resale, that assumes that it sort of prompt delivery, so delivery now. So that will have to be one of the five ships that are scheduled to be delivered this year. And some of those ships are already out on time charters. I think likelihood of getting hold of one of those as a resale is going to be difficult. There are some opportunities for maybe 26 delivery to pick up a ship under construction from, I would say, shipyards in China that have not built these facilities before.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So then you need to be a buyer willing to venture out in such a transaction. And given the fact that house yards have no experience, it will be at a lower price than, say, if the ship that come from Korea or from an experienced CR in China. So the liquidity in this game is very, very thin. If we wanted to buy a five year old ship, there are maybe potentially some things that can be done, but it's not like a full range of assets to pick up, right? So liquidity is thin.

[Svein Moxnes Harfjeld, President & CEO at DHT]

There is quite good liquidity on the buying side for ships that are sort of closing in fifteen years that are twelve, thirteen, fourteen years, and there are a few buyers. And there are still some buyers in the ships that are yet to be 20, but still have sort of a couple of three years left in them. And I think that with all the sort of political stuff going on, there will be a need for the some of the people that have been operating either on the fringes of this market or in it to renew themselves. So I think there will be continued sales of ships that are maybe a tad younger than some of the ships that are in that fleet. So ships that are built in 02/2005, '2 thousand and '6, '2 thousand and '7, '8, '2

[Svein Moxnes Harfjeld, President & CEO at DHT]

thousand and

[Svein Moxnes Harfjeld, President & CEO at DHT]

'9 maybe also.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

Okay. But if I were to pose a question like this, I have a five year old ship, which I'm asking or of which price is $114 Would you then be a buyer or seller at $114 which is the price we would use for a five year old ship in valuation of the VLCC company these

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

days? Day?

[Svein Moxnes Harfjeld, President & CEO at DHT]

You really expect me to reply to that? Sorry, Peter, but I'm not going to comment on that.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

Okay. Okay. No, my intention was simply just to get a sort of feeling for whether these prices we now use is in the marketplace, to higher or to low. But we'll continue to use them. If I can follow-up with sort of another scenario question here.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

In an event in which we'll see some deal being done making Russian oil available again, is it possible now to sort of and I understand that this is going to be speculation more than anything else, but for the VLCC market, I mean, the VLCC market didn't experience the same uplift when Russian oil was sanctioned. So I'm trying to figure out how the impact of Russian oil potentially then being not sanctioned again will make an impact on the VLCC market here. Do you have any thoughts?

[Svein Moxnes Harfjeld, President & CEO at DHT]

I understand. So I understand the question. So I think the key sort of restrictions that drove this, called it, dislocation in earnings between Aframax and Suezmax and the overseas over these last two, three years was that the primary loading areas of Russian oil in the Baltic Sea and Black Sea cannot accommodate VLCCs. If those oceans had been able to accommodate VLCCs, I tell you the VLCCs would have gone to India and China with sanctioned oil. But that was not possible.

[Svein Moxnes Harfjeld, President & CEO at DHT]

So if Russian oil is, for some reason, now going to be redirected back to Europe, that will be much shorter hauls for the ships that have been engaged in long hauls in the smaller sectors such as efforts and Suezmaxes. And the oil currently going to Europe will then go out to Asia again, which will be used on the VLCCs. Hence, my comment that I think the VCCs are the ones to stand out as the winners in what's going on now, how things will develop. So and it might be a little bit hit on the nose for some of the smaller ships.

[Petter Haugen, Equity Research Analyst at ABG Sundal Collier]

Okay. Okay. Thank you.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you, Patrick.

[Operator]

Thank you. And the last question today is from the line of Greg Lewis from BTIG. Please go ahead.

[Gregory Lewis, Managing Director at BTIG]

Yes. Hi. Thank you. Good afternoon and thanks for taking my questions. I guess my first question is around the comments you made around maybe an increasing in demand in the time charter market.

[Gregory Lewis, Managing Director at BTIG]

I guess earlier last month there was a trader that came in and took a couple vessels. I think it was for six, seven months maybe. Yes, just as you see the time charter market developing, your view is a lot more insightful than ours. Could you maybe are there is it largely a traders coming into this market? Are there captives that are coming in?

[Gregory Lewis, Managing Director at BTIG]

And is it, hey, there's a new U. S. Administration and you tell us the next couple of quarters are going to be messy? Or is it kind of some of the fundamentals that you're laying out where, hey, supply looks tight for the next couple of years and really what I'm wondering is are customers or potential charters starting to look to get a little bit longer?

[Svein Moxnes Harfjeld, President & CEO at DHT]

Yes, I understand. So the traders, they are basically always in the market and a lot of their pricing is driven by how the forward curve is looking or what they can do in the FFA market because they typically sort of take off some of the exposure in the FFA market or take a profit and whatnot. But I think what's gradually developing is that number of the end users, I. E, oil companies or refiners, Some of their time charter fleets are shrinking because time charters are expiring and they also have business that they need to sort of perform on. So they're becoming a bit light.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Hence, there are a number of end users, if you could use that expression, or IOCs that are in the market now and interested in building up the fleets or replacing ships that are expiring. So we always at DST have a very serious customer focus and try to engage with all of our customers deeply, not just in the swap market. So I'm hopeful that there will be opportunities for us to develop some more fixed income for our fleet. Exactly how much we can do rates to be seen and depends on the money, but there is real demand here from end users.

[Gregory Lewis, Managing Director at BTIG]

Okay, great. And then just my other question was, it seems to be a nonevent, but I guess last month, The U. S. Put some Chinese shipyards under like a, I guess, like a blacklist or whatever. I think it was not sanctioned, but blacklisted.

[Gregory Lewis, Managing Director at BTIG]

Does that create any impacts in terms of international trading companies' ability to use those yards for like drydockings and special surveys? I would think it doesn't, but I just want to clarify that.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Yes. I appreciate if you think that I can clarify it, but I'm afraid I'm not sure I can give you a credible answer to that. But I'm not so sure it's an issue, so at least not based on the information that's available to me now. So I'm sorry, I can't help you any further on that.

[Gregory Lewis, Managing Director at BTIG]

That was helpful in and of itself. Thank you very much. Have a great day.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Okay.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Thank you. Thank you, Greg. Thank you.

[Operator]

Thank you. There are no further questions. I will now hand back to the speakers for any closing comments. Thank you.

[Svein Moxnes Harfjeld, President & CEO at DHT]

Okay. Thank you for all for dialing in to DHT's earnings call. Your interest and support is highly appreciated. Have a good day.

[Operator]

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

Participants

Executives

• Laila Halvorsen, CFO
• Svein Moxnes Harfjeld, President & CEO

Analysts

• Jonathan Chappell, Senior Managing Director at Evercore ISI
• Frode Mørkedal, Senior Equity Analyst at Clarksons Platou Securities
• Omar Nokta, Managing Director at Jefferies LLC
• Petter Haugen, Equity Research Analyst at ABG Sundal Collier
• Gregory Lewis, Managing Director at BTIG