DHT Holdings, Inc. (DHT) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2019 DHT Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Laila Halvorsen. Please go ahead, madam.

Thank you. Good morning and good afternoon everyone. Welcome and thank you for joining DHT Holding's fourth quarter 2020 earnings call. I am joined by DHT's, co-CEOs Svein Moxnes Harfjeld and Trygve Munthe. As usual, we will go through financials and some highlights before we open up for your questions. The links 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 at our website, dhtankers.com, until February 13. In addition, our earnings press release will be available on our website and on the SEC EDGAR system as an exhibit to our Form 6-K. 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, including DHT's prospects, dividends, share repurchases, and debt repayment; the outlook for the tanker market in general; daily charter rates and vessel utilization; forecast of world economic activity, oil prices and oil trading patterns; anticipated level of new building and scrapping; and projected dry dock schedules. Actual results may differ materially from the expectations reflected in these forward-looking statements. We urge you to read our periodic report available on our website and on the SEC EDGAR system, including the risk factors in these reports for more information regarding risks that we face. DHT has reported the highest quarterly results in the company's 15-year history, with net income of $76 million or $0.52 per share, and EBITDA, which came in at $116 million. EBITDA for the full year of 2019 [indiscernible] $254 million and a net income of $24 million or $0.51 per share. Adjusted for non-cash changed and fair value related to interest rates, derivatives of $9.9 million. Net income was $84 million or $0.58 per share for the full year of 2019. The average earnings for the company's VLCCs operating in the stock market came in at $59,200 a day in the fourth quarter, and the VLCCs on time charter earned $54,600 per day. The result was impacted by an IFRS 15 adjustment totaling $4,700 per day, and the results for the VLCCs operating in the stock market adjusted for the IFRS 15 impact of $63,900 per day for the fourth quarter of 2019. OpEx for the quarter was $22 million or $8,800 per day average for the fleet for setting up, storing of [indiscernible] and other consumables in anticipation of IMO 2020. OpEx per day for the full year of 2019 was $7,900 per day average for the fleet. G&A for the quarter was $3.5 million, equal to $1,400 per ship per day, and the full year of 2019 was equal to 1,500 per ship per day. For the full year of 2019, the VLCCs operating in the stock market generated $36,400 per day in revenue on a TCE basis. As of today, we have booked 58% of our first quarter spot days at $81,600 per day on a discharge-to-discharge basis. The company has selected to pay a cash dividend for the fortieth consecutive quarter. A dividend of $0.32 per share for the quarter is payable on February 25 to shareholders of record as of February 18. According to our capital allocation policy, we will return 60% of ordinary net income. Our net income for the fourth quarter of 2019 includes among non-cash fair value gain related to our interest rates derivatives of $3 million. Moving over to the balance sheet, the quarter ended with $67 million of cash. During the quarter, we repaid $35 million under a revolving credit facility, and in addition, we prepaid the outstanding amount from DHT Lake and DHT Raven, totaling $22 million. In October 2019, 80% of the convertible notes due 2019 were converted. The company issued 4.4 million shares, and the remaining 6.4 million was repaid in cash. Turns availability under our revolving credit facilities is $80 million. Financial leverage is smothered with interest bearing debt to total assets of 42% based on market value for the ships. Looking at the cash bridge, we generated $116 million in EBITDA. Ordinary debt repayment and cash interest amounted to $28 million. $3 million was paid related to maintenance CapEx, and a net of $7.5 million was paid for [indiscernible]. $6.4 million was used related to redemption of convertible bonds, and $7.3 million were paid in dividends. We also prepaid long-term debt totaling $57 million during the quarter. Changes in working capital was $56 million, and it's mainly related to increased accounts receivable and accrued revenue due to the strong market and high freight rates, in addition to increased frame inventory for the quarter, and the quarter ended with $67 million of cash. With that, I will turn the call over to Trygve.

Thank you, Laila. At DHT, we do not make excuses, but we do think our spot earnings for the fourth quarter and the first quarter to date deserve some explanations and color. As you know, IFRS 15 has limited our ability to recognize revenue when the ships are imbalanced. And it so happens that we, in the fourth quarter, had an unusually large IFRS adjustment to the tune of $9.4 million. Without going into the details, we think you should note the main point, which is that on a discharge-to-discharge basis, which we believe by the way is how most of our peers report, our spot ships earned $63,900 per day in the fourth quarter. When it comes to our first quarter to date's spot bookings, we have frankly been a bit unfortunate with are scheduling. Over the past two months, we have had a number of ships tied up in congestion in Chinese ports. This affected our numbers negatively in two ways: firstly, because these ships were only earning yesterday's demurrage rates when the prevailing market was much higher; and secondly, because the ships missed the opportunity to get fixed when the market was at its strongest. By the time the ships finally came free of the Chinese delays, the spot market had already started receding. Frustrating indeed, but this is how the cookie crumbles for us this time around. On the cost side of the income statement, we'd like to highlight that the company continues to demonstrate good cost control and deliver competitive numbers. For the full year, operating expenses for the ships came in at $7,900 per day, and G&A for the year totaled $14.8 million, both of which we believe compares favorably with a peer group. As far as capital allocation goes, we'd like you to note the following four factors. One, we reduced debt by $97 million in the quarter, $17 million as ordinary payments, $47 million as net pre payments, and $33 million conversion and cash redemption of convertible notes. Two, following a significant build up in working capital in the fourth quarter, cash flow is currently strong as the ships perform the voyages fixed in high market. Three, the company will pay $47 million in dividends on the 25 of February. Four, you should expect further debt pre-payments in the current quarter. We now want to update you on our scrubber program and scrubber economics in general. So, let's start with the different TCEs obtainable in today's market, depending on what type of ship you have, and whether or not it is equipped with a scrubber. From the matrix on Slide 8, you see the rate of different TCE returns based on the same roll scale rates. Whilst the non-eco, non-scrubber ship will make about $16,500 a day in the current market, a scrubber fitted eco ship will make more than twice that, namely about $35,400 per day. You can also see that the scrubber premium base and current bunker prices are about $13,700 a day for non-eco ships and $9,400 per day for eco ships. It is lower for the eco ships because of lower consumption, of course. The eco premium is about $9,500 a day for non-scrubber ship, while it drops to $5,200 a day for scrubber fitted ships. The value of the fuel efficiency is lower for the scrubber fitted ships because HFO is cheaper than compliant fuel. And in this context, you may want to note that the composition of our 23 spot ships is such that we would average about $25,600 per day under these world scale and bunker price assumptions. That is about $9,100 a day above a non-scrubber non-eco ship, which typically the type of ship used in the many daily welcome reports. Let us now give you an update on DHT's scrubber situation. From the table on Slide 9, you will see that we currently have 12 ships with scrubbers. As you will recall from our last earnings call, we elected to postpone six retrofits in view of the dramatic increase in freight rates that we witnessed in the fourth quarter. The plan is to do these retrofits this year. From a market perspective, one would think that now would be a good time to go in for retrofits. We agree. But the problem is that this work is to be done in China, and we all know how the Wuhan virus has thrown that country into disarray. Right now, the shipyards are not in a position to even do the scheduled work, let alone any additional tanker retrofits. They simply do not know when their full labor force is going to be able to return to work. We are in continuous dialogue with our yard, and we'll certainly do as well as we can within the limits of what is possible. But at this stage, we simply cannot provide you more accurate information on when these six retrofits will happen. Finally on this topic, we'd like to highlight that the company has to date made 15 [indiscernible] of heavy fuel for its scrubber fitted vessels with a total saving of $15 million, and compared to even the bunker compliant LSFO. That means that we have already recouped 31% of the incurred retrofit CapEx of $48 million. And with that, I'll turn the call over to Svein for further commentary.

Thank you, Trygve. Time charter equivalent earnings commonly known as TCE is the key term in analyzing revenue in shipping companies. It does, however, increasingly consist of varying inputs and assumptions, hence presenting challenges in comparing numbers reported by companies and linking such numbers to broker estimates and for indexes. The following components and variables needs to be fully appreciated in order to make good sense of a TCE number. Firstly, as Trygve mentioned, our industry now has four categories of ships with very different fuel economics, depending on scrubbers and designs. Secondly, few costs and spreads between heavy fuel oil and compliant fuel both vary, and fluctuates geographically. Thirdly, voyage durations ranging between 20 days and 120 days will, to a varying extent, fall within or cross between accounting periods. Lastly, the introduction of IFRS 15 is adding volatility to earnings in an already volatile business. In our humble view, this has not improved visibility for stakeholders in their endeavor to understand earnings in our industry. In addition to these points, company could report TCE differently. The differences may represent the following alone or in combination: accounting numbers that include IFRS 15; two, tool earnings without a IFRS 15; three, exclude ships affected by IFRS 16; and four, classification of ships in age groups. As confusing as all these might seem to stakeholders wanting to decipher performance, we believe the conventional and well-proven path of earnings per share to work well when analyzing performance and return potential. When evaluated in relation to share price, it tells a lot about the return one will make on the investments. In this regard, you should not be surprised to learn that the DHT puts up a very good showing. Our clear and well-defined capital allocation policy and given earnings per share, a policy that tends to err on the general side, ensures that investors are timely awarded to quarterly cash dividends. We will now provide some market commentary. We are for sure meeting some headwinds in the stock markets. The outburst of the coronavirus is playing its part through a variety of factors. It is reducing near-term oil consumption in China by a meaningful number, hence imports and transportation [indiscernible]. The oil prices softened and refining margins have shrunk, reducing economic incentive for refiners to run at high utilization. OPEC is contemplating an additional production cap in response to this in order to manage price. Since September last year, some 26 leases leased, owned by Costco, has been tied up in sanctions preventing them from trading. These ships are now on their way back into the market or might a bit staggered as various operational issues needs to be resolved, such as higher approvals and banking operations made challenging by quarantine imports like Singapore. It is also a time of year that typically sees some reduction of seaborne trade, as refiners prepare for maintenance towards the end of the quarter and beginning of the next. It is very important to note that the reason strong rates and volatility, it unlikely ever happens without strong underlying fundamentals. Our income on this short-term volatility and seasonality excluded, still growing at a steady pace. The incremental supply of oil comes from the Atlantic and the demand growth in Asia is in Asia, a combination that drives longer transportation distances, thereby increasing utilization of the fleets. The fleet is quickly aging with almost a quarter of the fleet being older than 15 years. Importantly, there is a meaningful number of ships turning 20 this year and next. I'm going to at least expect these ships to retire that milestone. The order book is in decline with scheduled supply of ships over the next couple of years now below 8%. There's hardly any ordering on new ships, reflecting uncertainty over future design and technology related to propulsion and fuel. So in sum, we are realistic about the near-term weakness in the stock markets and remain positive of the outlook beyond this. And with that, we open up for questions. Operator?

Thank you. [Operator Instructions] And the first one is coming from the line of Jon Chappell from Evercore. Please go ahead.

Thank you. Good morning or good afternoon, guys. Trygve, first one for you on the scrubber impact. Thanks for the detail that you provided this morning. I'm trying to back into a TCE impact quarter to date, and it may be far too simplistic. But if we use the $14.6 million, and then a number of days estimate on your 12 ships, it seems like it's about $10,000 a day so far. So first of all, could you confirm that, and then second of all, to the extent that you can? And second of all, the $81,000 that you booked quarter to date, I just want to be sure. Does that include that potential $10,000 impact on the scrubber fitted ships? So, if we looked at the non-scrubber fleet, it would be somewhere in the 70s?

I'll answer to the last part first, Jon. Yes, the number we reported, that is for our entire spot fleet. So it's both ecos with scrubbers, and there non-ecos without scrubbers. So it's mixed results. As for the first question on the savings and how you can back that into rates, I think you got to be cautious because this is really at a time when we bump it up on the ships with compliant and how much we bunkered can vary, and how long it's going to take to consume that bunkers will also vary. So therefore, it's a little difficult to sort of calculate the exact number based on that, and I don't really have any further color on that at this point.

Okay. The other thing I wanted to address was the time charter rates. Can you give us a reminder? There's five vessels on time charter. It seemed like your time charter rates were substantially higher this year, so do -- or this quarter. Do all of them include a profit sharing element?

Yes. And first of all, there's four ships on time charter, and all of them have a profit sharing element, and three of them have a base rate that is guaranteed, and then it goes 100% to us, and then it splits above that. And the fourth one does not have that many forms. It's just a higher base and then immediate sharing after that.

Okay. It said five as of December 31, so I assume one is expired in the last 36 days or so?

That's correct, yes.

Okay. Thank you. Finally, one kind of technical modeling one for Laila. Now that the diluted shares come into account, given the profitability and the convert, what's the adjustment to the interest expense when we do the diluted EPS calculation?

The shares, they're explained in the notes in the financial report. So it's corrected to say due to the income in the quarter. This has an impact. While if you look at the full year, it has not any impact on the diluted earnings per share.

Right, but -- so we'll assume that you'll be profitable going forward. We had 20 million shares or so to the diluted count, but I think it's part of the calculation for diluted EPS, there is a add back to the stated interest expense. I don't know. Maybe we could take it offline. I know in prior -- with you prior convert, it was at $5 million a quarter. I was just wondering if you had an updated calculation for that.

No. The interest on our accountable bonus were $0.5 million. And we also have a share that amortized throughout the period of the convertible one.

Okay, all right. Thanks, Laila. Thanks, Trygve.

Next question is coming from the line of Randy Giveans from Jefferies. Please go ahead.

Thanks, operator. Howdy, y'all. How are you?

Doing all right.

Say, I guess the first question just on the 60% payout, obviously your share price is falling below the current levels at October 1 before the fourth quarter surge. So, why not include some kind of share repurchases as part of that $47 million return of capital? And then I guess going forward, do you expect continued full dividend payouts for the 60% of net income, or will all their recent share repurchases include it?

Our practice on the 60% is that if we didn't do any repurchases in the quarter that we're reporting, so i.e., the fourth quarter now, which we didn't, then we would pay out the 60% of dividends. But if we had repurchased anything in the fourth quarter, then dividends might have been lower. But suffice to say that the share price was doing very well up until New Year, and past that, actually.

I think also maybe add to that, that share buybacks is not just a question of whether you're trading above or anybody at any given time, it's also where you are in the cycle. So, I think we are in a sort of recovery or a strong part of the cycle by the small part of this holiday. So it -- which reflects also an appreciation of asset prices compared to, say, 17 and 18. So, in that period, it was more attractive to acquire shares or in the 16 even, as opposed to this point in time.

And of course, the tax is at the board's discretion, but we've had the policy of minimum 60% of ordinary net income for five years now, and we think it serves shareholders well and it serves the company well. So, you shouldn't really expect a deviation from that in the short term.

Sure. All right. And then I know you touched on it briefly during the prepared remarks, but, like you said, your first quarter bookings, decent at 58% it at $81,600. But relative to some of your peers who reported maybe 60% at closer to $90,000, that's without scrubbers. Can you help reconcile that a little more other than just kind of the vessels being stuck in Chinese yards? Is that issue now behind us? And then obviously, with rates falling recently, what are your kind of expectations first quarter relative to fourth quarter kind of on an overall basis?

I think to the to the first part, scrubbers versus non-scrubbers and the period talking about, of course, made it very clear to everyone that they went out early and acquired the compliant fuel on the cheap. And of course, they've had effect on that certainly fleet-wide from January 1. And hats off to the numbers they presented. That was very strong indeed. And to our number, I think the key point is that we weren't totally stuck with ships fixed before the spike in the market that lasted longer than they should have because of these congestions.

And then kind of full quarter, first quarter, relative to the fourth quarter?

That's very difficult to judge. We're in a in an environment that is very unusual. There's certainly a very weak freight market out there. And I guess all you can do is just play with numbers. And I think one of the reports from one of you guys this morning was that at rates in the mid-20s for the unfixed portion of the spot fleets, you should see a quarter not too different from Q4. We haven't run those numbers ourselves, but I think that's a meaningful way to approach it.

I just wanted to give you a chance there. And then I guess real quickly, obviously fourth quarter was pretty hairy with the converts, and debt repayments, coverall fire days, and all those things. But what's your full average or your average for the full year 2020 EPS breakeven rate for the fleet? Is it low $20,000s currently?

EPS is higher than that. So, net income wise, it's sort of in the high 20s, and cash breakeven on the spot ships, it's below $20,000.

Excellent. That's it for me. Thanks so much.

Thank you.

Next question is coming from the line of Ben Nolan from Stifel. Please go ahead.

Thanks. So just a couple quick ones. The first is on the spreads that you guys are able to get on the scrubbers I was just curious is just making sure that those were actual real numbers real time based on the porch that you are at it not just an average of the market or something like that. Correct?

That is correct. It's actually each individual of those 15 bunk rooms at what worked and what they paid for the HFO and what compliancy was quoted at the same time, and it's weighted by how much we've done on each one of them.

Interesting. Very impressive results on that front. My next question relates to just sort of where we are at the market. Obviously, the stock market is weak and it sounds like you guys think that is just temporary and that things will pick up. In your experience, at what point do you think asset values might be a little bit at risk or people begin to be a little bit nervous in terms of buying or looking to locking games? How long or how low does it have to go before we might see a little bit of retrenchment there?

It's fair to say that liquidity in general only lives to see -- purchase is rather thin. The transactions you have over these past few months have been a handful of sort of brand new ships with scrubbers changed hands at premium pricing. And then there's been a number of ships sort, of an 18, 19, 20 are brackets that got fairly good prices in response to the stock markets. For the [indiscernible] category you would expect maybe some of those upper transactions are quite down a bit, given where we are in the in the stock market. So there has been very few transactions -- if any -- ships are leaving some, but the say between five and 12, 13 years of age has been very quiet.

Okay, great. Well, I'll turn it over. I appreciate. Thank you guys.

Next question is coming from the line of Omar Mostafa from Clarksons Platou. Please go ahead,

Hi there, thank you. Hi, guys. I'd say just maybe a comment to start. I think it's an interesting time that we're in. I feel like the tone of this call is a bit somber and you wouldn't think that you reported your best quarterly results ever if I recall, and your guidances were to potentially be even better in the first quarter. Having said that, I wanted to ask about the dividend policy. I know you've been addressing it and as we think about a year, the 60% for the fourth quarter, it clearly paid that out. As we think about here we are in 2020, you start off very strongly, there's a lot of uncertainty and rates have come off, how should we think about the payout percent of Q1 results when all is said and done? Should we look at it as its own specific period? Or do you think about more of a smoothing-out process throughout the year where maybe you hold some back in the first quarter and then by the end of the year, you're paying a bit more out? Can you get some color on that?

Sure. No, we're not going to smooth any things out. We think the formula-based dividend is what it is and if we earn X numbers for the first quarter, we'll pay out 60% to that or return 60% to that with bills to be in buybacks, of course. And if then the subsequent quarter is breakeven with no net income, we will do 60% of that. And of course, based on past records, you've seen that we've been paying a nominal dividend even when we have been under breakeven. But no, there is no desire to smooth it out. We'll pay as we earn.

Okay. No, thank you. And then obviously you guys have been focused on paying down debt as well as repaying shareholders. You pre-paid the $57 million in the fourth quarter. That's obviously quite impressive, I'd say in just one quarter, being able to pay off that much and it looks like you can have another significant cash build in the first quarter. When you think about the cash and that, looking ahead here in the near term, what do you prefer to do? Do you think you want to pre-pay it further or just maybe build up a bit more of a war chest to prepare yourselves for certain opportunities down the line?

I think you should expect us to pre-pay further debt. But keep in mind that our two large facilities have got revolving branches. So that is sort of the natural first port of call if you like, of doing leveraging.

So in a way, you can do both. You can reduce debt, but you have availability if you see a tempting opportunities.

Yes. Okay, so you can tap into that. Okay, I'll leave it there. Thank you.

Thank you.

Next question is coming from the line of Robert Silvera of R.E. Silvera & Associates. Please go ahead.

Hello, gentlemen, and thank you for taking my call. I want to complement you in this world of where we're operating now, of the confusion from so many different conflicting kinds of things from geopolitical, to disease, to everything else. In the face of that, I think you have done a wonderful job. I listened to the J Mins Meyer [ph] podcasts that you had and you had spoken in there about heading toward zero debt, which I like the idea of because we're in a cyclical business, as we all know. And that's planning for far in advance for when the time comes, when rates are very low, that we can still be a strong company. And I love that kind of philosophy on your part, and I complement you guys on the job you've done and your long-term attitude toward what you've done. I do have a question in the voluntary prepayment of long-term debt you prepaid $57.3 million. However, you drew $30 million on the scrubber financing under Nordea. That sounds kind of interesting to me because you're borrowing on one hand but you're paying off early on the other hand. Why borrow if you have sufficient funds to pre-pay debt? Is it an issue of different interest rates?

That's a good question, Robert. It is partly that the repay on prepayments we did were for the most part into our evolving facility. So just like on the on the prior question, those funds remain available to us should we ever want to use them for something. So that is part of it, that you take money that's available to you, and you pre-pay elsewhere. We can actually redraw if we should be interested in one to do it. And then the last part of the prepayments was on the two ships, Lake and Raven. We think it behooves any tanker company to have a certain number of unencumbered assets at any given time. It eases, gives you a lot of flexibility and if you were to sell those ships, of course, is an easy closure and all the cash goes to the seller and not to the bank and so forth. So we think that has some merit as well. So that's why you saw a mix of pre-paying on revolvers, clearing out the debt on two ships and then actually drawing up for the scrubber program.

Let me ask this then, if you've completely cleared out the debt in two ships, how many in the fleet do we have in that shape where we're completely clear?

We have four ships currently that are without any debt on them.

Wonderful, okay.

And you'd also had that by clearing out all debt on the ship, it has a significant impact on the overall breakeven levels. So when we do prepayments, you look at the future availability and that's when you do revolver prepayments and then when you want to drive down your cash breakeven for entire fleet, well then it may behoove us to clear out the individual ships.

Yes, that is why I say your long-term philosophy, the way you run the business, I am so pleased with our company. As pleased very much. Yes, that's my only question. The rates have softened, but do you see this corona virus having a long term effect rather than a short term effect now that they've talked about the possibility of curing it?

I think it's impossible to really have educated response to this frankly. So, that is very tough for the people in gold in particular and it has impacts on our business and many other businesses, too. But for how long, and how deep, and why this will influence the businesses, frankly, it's impossible to say. But I think our company in general is strong. We have a very healthy balance sheet, very low cash breakeven levels, so it enables our company to sail through tough waters like this without really sort of denting the company. But yes, it's impossible to say really [indiscernible] how long it will last.

Okay. Well, we have no intention right now of increasing the size of the fleet either, right?

That's correct.

Good. Thank you, gentlemen. I think you're doing a wonderful job and I sure appreciate the dividend idea of 60%. I'm going to stay with that. Oh, another question. One other question. Do you have any more of these convertible bonds? Or are they all gone now?

We have all the convertible bond which is all in due in August 2021 and the nominal amount of that is $125 million.

$125 million or $25 million?

$125 million.

$125 million still in convertible bonds. What's the conversion price now?

It is at dividend-adjusted so it's now just below $6. So following the declared dividends for the fourth quarter, there will be a further reduction in the strike and we will send out a press release on that particular calculation once it's done. But just long term, just to comment on that long term, this is the type of instrument that ideally we would not like to have in our capital stack. So we prefer conventional mortgage steps and equity simply. So we have a sort of ambition of getting rid of that instrument one way or another and preferably by just paying it out.

Very good. I like that idea. Thank you very much, gentlemen. God bless your work.

Next question is coming from the line of Nicolay Dyvik from DNB. [Operator Instructions] Thank you. Please go ahead.

Hello. Just to clarify, you touched upon this, but should we expect this all eight scrubbers to be retrofitted once Chinese [indiscernible] post virus?

We have six projects that have been postponed. So we are closely monitoring this and we have both the equipment and the engineering. We have prepared the equipment related to this. So it's certainly the plan to install this at an opportune time.

I guess it's a bit early but at least [indiscernible] focus on this. Could you give some guidance on the speed of the scrubber fitted ships in January compared to the non-scrubber fitted and how you think about maximizing the time charter performance versus the increased focus on CO2 emissions?

So, typically, when you are laden with cargo, the speed is a contractual obligation with the clients and the most used speed in every charter -- the company's is 13 knots laden. So, you cannot really change that. The balance speed is typically a function of the market on timing in reaching for the cargos in place that you want to do bid.

So you're saying that [indiscernible]?

Of course it does. It's a commercial evaluation so, depending on where the market is, and the where it makes sense to speed up or slow down or it's a particular loading area we want to reach in a particular date and so forth. So there's a commercial evaluation in the balance speed.

So in the margin, the non-scrubber ships are incentivized to slow down quicker than the scrubber-fitted ships, if that makes sense.

Thank you.

The next question is coming from the line of [indiscernible]. Please go ahead.

Hi, guys. Quick question. You guys have $50 million available on the scrubber facility, but you've only drawn $30 million on it. Correct?

Yes. It's still on that number. That's correct. Yes.

Yes. So are you planning on drawing the remaining $20 million?

Yes. The total budget for all of the retrofits was $72 million and so, and we have a facility of $50 million. So what we've been doing is keeping that ratio debt and equity in this -- basically at those levels. That's why we haven't drawn everything yet.

That's a common format. The facility has been reduced to $45 million after the prepayments of DHT LAKE and DHT RAVEN, $31.5 million was drawn from the year end and $13.5 million is now available.

Okay. And just some questions around surrounding China. You guys said that there were some airport delays in China that sort of negatively affected your TC equivalents in Q4. Now looking forward with corona virus and some negative implications there at least currently, do you think you could be stuck in in Chinese ports and that could possibly affect your TC because you're on the merge from higher levels in Q1?

I think previous commentary on the merge impacting our results is mostly focused towards the bookings today for the first quarter. So that we have a mix now, geographical destination. So we have a lot of ships not going to China also at this point in time. But the condition has eased up. There was a period where it was very busy in China and just was simply no delays. It's not as bad as it was.

And just a last question surrounding China, the U.S., with the Phase 1 deal, there was a $50 billion commitment for buying energy-related commodities. Have you guys seen increased the inquiry by Chinese charters to get U.S. crude cargos over to Asia?

Not yet, but I think it was sort of easy given the whole package because oil has significant value. So we understand that there are discussions about getting traction in this trade. We have certain expectations that you will see that commence in the not too distant future.

And there was sort of a lot of market participants have been saying that Costco vessels will be doing the majority of this trade. That's not something we personally agree with, but what are your thoughts on that? Do you think it's going to be a Chinese-dominated trade by Costco vessels in the like? Or you think it's going to be a maxed mixed bag?

I don't think it matters whose ships are doing this because you need to look at the market in totality. And simply this trade that is extending transportation distances and will increase the future utilization and it's a positive. So exactly whose ship is doing what doesn't really matter too much.

All right. That's all the questions I have today. Thank you very much.

Next question is coming from the line of John [ph] from independent. Please go ahead.

Yes, good day and thanks for taking my question. The Libyan civil war has shut down their oil export capabilities. I was wondering, were you sitting in some of the operators looking for [indiscernible] in what would be a more traditional VLCC [ph] market? And my second question is you respect the Asian reclining turnaround a holiday that began as it usually does in late spring? Thank you.

I think to your first question, there's always some level of substitution between the ship sizes and it's sort of partly driven by how freight is priced on these different ship prices shift from time to time. So, for instances [indiscernible] widens, then people might sort of consider smaller ships and vice versa. But the Libyan trade is not really directly impacting these sea business as such. This is a trade typically or mostly prior -- but to some extent, also, it could be bigger ships. So we haven't really seen any of that. If I understood your second question correctly, you talked about how deep the potential maintenance spare the refiners could be in the spring. I think we read reports that the expectations are that the turnaround will be not as deep as it was last year, and hence that would be a positive once it's done with.

Thank you.

There are no more questions. Please continue.

Well, then it remains for us to just say thank you to everyone for continued interest in DHT. Thanks and have a good day.