Good day, and thank you for standing by. Welcome to the Q3 2022 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 Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, Laila Halvorsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings third quarter 2022 earnings call. I'm joined by DHT's President and CEO, Svein Moxnes Harfjeld. As usual, we will go through 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 at our website, dhtankers.com, until November 15th. 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 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 SEC EDGAR system, including the risk factors in these reports for more information regarding risks that we face. The company continued to show a very strong and healthy balance sheet and the quarter ended with $65.7 million of cash. In addition at quarter end, the company's availability under both revolving credit facility was $235 million, putting total liquidity at $301 million as of September 30th. Financial leverage is about 22.6% based on market values for the ship and net debt for vessel was $15.4 million at quarter end, which is significantly below current scrap values. Looking at the P&L highlights. EBITDA for the third quarter was $35.6 million and net income came in at $7.5 million equal to $0.04 per share.…

Thank you, Laila. On this page, we are showing a new table with the purpose to provide better guidance with respect to the quarter succeeding the one that we are reporting on. So for the fourth quarter of this year, we have a time charter book at an average rate of $34,800 per day covering some 510 days, roughly a quarter of the period as a whole. As of today, we have booked 69% of our 1,540 available spot days at $61,800 per day. Further, we are providing the estimated spot P&L breakeven for the period allowing you to model the TC income based on your own assumptions for the unfixed spot days . We can tell you this much, as of today, the rates we are seeing for the balance of the quarter are substantially higher than what has been secured on average so far. You think this piece of information that we will continue to include in our releases going forward to make good sense in relation to our new dividend policy of 100% of net income to be paid at quarterly cash dividends. As announced earlier this year, we have embarked on a project to retrofit eight eco ships with exhaust gas cleaning systems taking our fleet with these installations to 100%. The current spreads between VLSFO and HSFO are attractive offering payback on the retrofit investments inside the year. The first vessel will be retrofitted towards the end of the year being a vessel that will enter into a long-term time charter upon completion of the installation. Following this, we will retrofit the DHT Colt and the DHT Stallion during the first quarter of 2023. Both vessels have natural drydocks, hence no commercial off-hire will be taken. For the balance of the project, we are adopting…

[Operator Instructions] Our first question comes from the line of Frode Morkedal from Clarksons.

First question I had is on the dividend policy. In respect of the tanker cycle, I remember you had this nice cycle chart in the past. You talked about how you invest and when you harvest depending on where you are in the cycle. So maybe you could elaborate on that in terms of the -- when you don't change the policies, when whatever it is, upcycle ends?

Then this policy that we have with 60% or minimum 60% of ordinary income was put in place in 2015. At that time, our leverage level was almost sort of in the 50%, 55% [fiscal], and it has been brought significantly down since then. So as a reflection, the balance sheets and the cost structure, and also that we have no CapEx program for new ships going forward, we felt it right, timely to introduce this new dividend policy. So, I think all these things will have to be looked at depending on the capital structure and where you are, but our intention is certainly that this policy should be sustainable and not just the -- something happy will change with short intervals. So, we would like to think it's well thought through and then that we will have the capacity to continue with this for a prolonged time. And keep in mind that there is also meaningful difference in net income and cash flows. So there is ample cash flows to -- ample room then to service debt and also potentially do prepayments should we so desire.

Second question on the market. I guess it's just a few weeks’ time and you have a ban on the Russian oils coming into play. Do you notice any change over the now in terms of chartering behavior, trades routes or in anything else? How do you see it's developing?

I guess, we see some activity that we are not part of, an observer involving so -- the only sort of high-level view list but we do you see some intentions to bring oil out of the Baltic in particular, out to areas where it can be shipped on to larger ships and then to be sent to the Far East. So not only are there longer distances, but this sort of mode of transportation is a bit inefficient and time consuming. So again, it was reducing the productivity of the fleet. So it is a bit early days, and I think people are probably planning a lot in their offices without really showing the cards just yet. So I think towards the end of this month, we will see some real activity, I think already get going.

Our next question comes from the line of Jonathan Chappell from Evercore ISI.

Svein, tywo parters for you. So it looks like the Colt and the Mustang were extended by a year into the third quarter of next year. Just wondering if you can give a sense for the type of increase in the rates in the prior one year contracts, just given the strength in the market since that time? And the second part to that time charter question is Puma looks like a phenomenal rate, what's your appetite for long-term contracts like that, especially contemplating a new dividend policy?

So the two first contracts, one was extended basically at the same rate that we have, it was an optional year, that's what they are this year. And -- similarly, the other one is also a business continuation if you like. So these rates are of course below the current market, but these are time charters that we of course enjoyed greatly last year and the first half of this year. So it is the sort of tailend of that. We wanted to get something in the book and we have done these couple of three ships for longer periods as you've already seen. Right now we're taking a big step back and they want to see rate appreciate and also, hopefully with a much or a bit commencements much further out. So we would expect the three year rates today to be closing in at around the $50,000 mark. And I think with the current freight market, that's basically $90,000 to $100,000 a day, I think you will see more of these opportunities in the longer run. So we would like to wait and want to enjoy the spot market now for a good while longer before we really build on this. But on the right opportunity with the right clients and the right ship and all that, it's sort of significant knowledge we have, we will entertain that. But they will be meaningful spot exposure for a while long or so.

And then the other topic is the scrubber installations. I just wanted to make sure I understood, you said the Colt and Stallion natural drydocks dates, so there's no operational off-hire time. Does that mean they still earn full quarters worth of TCE earnings even though they're undergoing the retrofits?

No. So these two ships are -- is scheduled for the first special survey. Now, they were built in '18 and those -- the survey dates are in the first half of 2023. So they will be off-hired in any case. So this is when you're going to do --

No incremental off-hire.

Exactly. So this is certainly going to do the scrubber installation.

And then when we think to the other, the pragmatic schedule. It almost seems like that means we have to look through the first quarter. So should we think like 2Q, 3Q of next year? And then the final part of this topic is, are these like 25 to 30 days or a little bit lower since you're trying to manage them around their schedule on their voyages?

This very much depends on where you are. And of course, as you know, these voyages that you fixed in the stock market, they are easily 45 to 50 days, if not longer. So -- and you want to have also sort of a favorable geographical whereabouts on the ships when you go to drydock. So, we will take this step by step, frankly, and we have limited guidance beyond that at this point. But I think you need to rely on us to be commercially -- act and try to do this as good as we can. So, if the opportunities are reflective of the current spot rates, of course, it's important for us to try to put that in the books and then wait for a little while longer, so.

We'll now move on to our next question. Please stand by. Our next question comes from the line of Benjamin Nolan from Stifel.

This is Macalla Rogers on for Ben. Thank you for taking our question. We just kind of wanted to take it back real quick to the new dividend policy. I know you mentioned the intention is the policy should be sustainable for some time. We just had -- just was wondering if you could provide a little insight on maybe why the change at all versus potentially allocating the excess capital for fleet renewal or growth? So thank you.

So as we stated, our balance sheet has been brought down with a very robust structure or very low leverage. And at the same time, we have no investment program, and that's the point, its a reflection of where asset values are. We think they are too high to buy ships to date, they require rates for those investments to be attractive over sort of a 20-year horizon we think maybe good. We are not sort of momentum investors that will buy a ship with a expectations of having a feel-good factor in next 12 months, because the asset price might be slightly higher, we want to invest and operate the ships over a longer period of time. So, this is the reason for that. We bought two secondhand ships last year, we were set to buy some more but prices, moved up too quickly. So, what we did instead of course, as you know, we bought back about 6% of the company stock and the cash spent on that was equal to ships. But we bought our own ships essentially then at a discount, so sort of happy with that investment as well. But again, our balance sheet is robust. It doesn't -- this new dividend policy does not prevent us from making investments when the right opportunity arise, so. And we have also access to debt if we are interested. So I would like to think that we have thought this through and are not sort of precluding ourselves from also investing in due course in the business.

Our next question comes from the line of Omar Nokta from Jefferies.

Thank you. Svein, just a couple of quick ones for you. Just first on back to the dividend. The 100% earnings payout policy, just wanted to be clear, it looks like you've paid out the full earnings for the third quarter of $0.04, which includes gains and other items. Should we think going forward that the full payout here is going to be reflective of gains? So you'll pay off the gains, but then also hold back any losses? And how do you think about the cash and noncash portion of that going forward?

So in the past, we've let the shareholders have the benefit of cash gains, extraordinary cash gains in the P&L and also in a way benefit of not including noncash losses, right. So we think about net income as clearly stated, without any caveats.

And then just – you’ve gotten this question in the past and just maybe could you explain again, maybe just the difference in terms of the accounting treatment, in terms of discharge versus a low to discharge because of the wide difference in what you've reported? You got 22,000 but then you also got 27,000 on relative discharge -- sorry on discharge with discharge. Just want to get a sense, if you wouldn't mind just reminding us what the differences are and how that affects your earnings over time?

Yeah, of course, I can answer that. So on the previous revenue counting, we used discharge to discharge, meaning that we included the revenue from the previous voyage. Now what we need to do according to IFRS 15, the new revenue -- it's not new anymore, but the revenue policy is that from discharge from the last voyage and until the vessel has loaded, there is no revenue that is included in our books. So it is of course, the same revenue for the total voyage but it's reflected on a much less period of time.

Does that mean basically that you'll have maybe wide variances between both figures but as -- do they smooth out over time, effectively?

They definitely smooth out over time. So you'll of course, have exactly the same revenue but it's reported on a different period, so from load to discharge. And clearly then it's more volatile and in market with increasing freight rates, you will then have to postpone in a way the revenue and you will gain that again in the next quarter.

Okay. Thank you. I'll turn it over.

Omar, I’ve got few things as it is, right? At the shipping company, when we trade our ships we focus on discharge to discharge, which is the commercial level evaluation, right? In this regard in a way when making calls on what to do with the ships, what the accounting treatment is, the money is made just in different areas.

Our next question comes from the line of Chris Tsung from Webber Research.

Just curious on your thoughts on this shadow fleet. Do you expect it's mostly involves VLCCs or do you see some demand for Suez or Afras as well?

I think, it will be across the board. So of course, some of these trades will not be sanctioned. So then it's not really a problem. But there are some sanction trades. And I think whether it's Afra/Suez there will be a mixture. So it's hard to actually have a view on how many or which size.

Now, for the five year charter with the Puma, I know it's your second one I believe, you get the Osprey from last quarter. How many more are you guys planning to face or put another way, like will these should be a company that mostly does time charters or do you still plan to keep some spot exposure?

We like to have both, but it depends on where we are in the cycle. And importantly, it depends on the nominal money. So for now, we will take a step back and we will in due course try to develop additional fixed income but we want the rates to be higher than where they were earlier this year. So as I mentioned earlier, on the call, we believe that the three year rates are sort of in the plus minus $50,000 territory depending on the type of ship and the position and so forth. So, thinking a bit academically about it, it is possible in due course, to sort of fix a meaningful portion of the fleet a very rewarding rate. And then I underscore very rewarding rates. Of course, if you can create the visibility on earnings and also in relation to our dividend policy that might have some merit. But it's a bit hard to say that, yes, that will be the case. It will not be the case. But I think you have to trust our commercial abilities and trying to make the most of it.

Right. Of course, it's definitely within context of your dividend policy, just trying to give some sort of stability towards it. And just one final one and just about the CI, the upcoming CI regulations. Just curious with you having two ships out there for five years, just wondering what the responsibility falls on the owner or the charter of the vessel going onto like starting January 2021 and '23?

So the EEXI is a calculation based on the vessels’ abilities and design. So, these ships are eco ships and they have no issues whatsoever with EXI on the CII for many years to come. So, we have of course done the calculations for the entire DHT fleet and I have a sort of very clear view on how it will develop. And a little bit by chance, if you like the demographics of DHT’s fleet, it's so that when 2026 comes about, which is sort of the next leg up in the restrictions or in the regulations, that is sort of the time and our oldest ships are closing in on retirement. So we don't really see any commercial impairment for the DHT as such. But of course, the customer that is considering taking a ship on time charter, they will need to view for their own sort of book if you like, on what sort of initial levels they want to have in securing transportation services. So it's our responsibility to make all this calculation and it's also ship owners that will have to report and manage this.

Our next question comes from the line of Anders Karlsen with Kepler Cheuvreux.

The market is looking very promising but to put the deal away, what do you consider to be the main risk factors into market developments going forward?

There are, of course, some macroeconomic gloves out there and then inflation and also the efforts that central banks are doing to stall that and how that will impact general economic growth. So, of course, if we do certainly get the world economy into recession and a hard one, that will of course impact oil consumption. And again, demand for oil and the demand for transportation. I think that's sort of the big issue. But if you look sort of down to the industry more insulated, I think there's -- long time ago since you've seen so many positive elements in structuring the market that we are entering into now. So all-in-all, I think that looks very good, barring sort of and the macroeconomic events that would pose a big negative correction.

Our next question comes from the line of Rick Sherman. Please go ahead announcing your company name.

Yeah. Hi, Rick Sherman, Private Investor. Thanks for taking my question. I just got a quick question about the sale of the ship for $37 million. On the mathematics where you paid off $12.2 million in debt for a net of $24.8 million and $6.8 million profit, is that basically because you're carrying equity cost on the thing with $18 million. How did you derive the $6.8 million profit on that ship?

So the profit in the P&L is the balance between the net proceeds and the book value of the ship. So the ship was acquired in 2017 and has a bit -- didn’t appreciated this instance.

There are no further questions at this time, so I'll hand the conference back to you.

Thank you very much to all for following DHT. That's appreciated. Have a good day. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers please standby.