Good day, and thank you for standing by. Welcome to the Q2 2025 DHT Holdings, Inc. Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, DHT President and CEO, Svein Moxnes Harfjeld; and Laila Halvorsen, CFO. Please go ahead, your line is open.

Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings Second Quarter 2025 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 on our website, dhtankers.com, until August 14. 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. As usual, we will start the presentation with some financial highlights. In the second quarter of 2025, we achieved revenues on TCE basis of $92.8 million and adjusted EBITDA of $69 million. Net income came in at $56 million, equal to $0.35 per share. After adjusting for the $17.5 million gain on sale of vessels related to the sale of DHT Lotus, the company had a net profit for the quarter of $38.6 million, equal to $0.24 per share. Vessel operating expenses for the quarter were $19.6 million and G&A for the quarter was $4.6 million. For the second quarter, the average TCE for the vessels in the spot market was $48,700 per day, the vessels on time charters made $42,800 per day, while the average combined TCE achieved for the quarter was $46,300 per day. DHT continues to show a robust balance sheet with low leverage and significant liquidity. We have continued to strengthen our balance sheet and the second quarter ended with total liquidity of $299 million, consisting of $82.6 million in cash and $216.5 million available under our two revolving credit facilities. At quarter end, financial leverage was 14.1% based on market values for the ships and net debt was $10 million per vessel, well below estimated residual ship values. On this slide, we present the cash flow highlights for the second quarter. We started the quarter with $80.5 million in cash, and we generated $69 million in EBITDA. Ordinary debt repayment and cash interest amounted to $19 million and $24 million was allocated to shareholders through a cash dividend. $6.1 million was used to acquire the additional shares in Goodwood Ship Management, $1 million was used for maintenance CapEx and $39 million was used for our newbuilding program. Proceeds from the sale of DHT Lotus was $51 million. $52.6 million was used for prepayment of long-term debt, while net issue related to the refinancing of DHT Jaguar was $4.5 million. Positive changes in working capital and other amounted to $16.5 million, and the quarter ended with $82.7 million in cash. With that, I will turn the call over to Svein.

Thank you, Laila. It has been an active quarter for DHT, both closing projects that had been in the works for some time as well as new ones. You will hear me take you through our quarterly highlights, although several of these events have been communicated previously as subsequent events to the first quarter report or as separate events post the first quarter report or in the most recent business update. Firstly, the DHT Appaloosa entered a 7- to 9-year time charter contract with a global energy major. The contract has a fixed base rate of $41,000 per day plus a profit-sharing structure in which earnings in excess of the base rate will be shared 50-50 between the customer and us. She delivered into the contract in May. We entered into an agreement to acquire a modern secondhand vessel built at Hyundai, South Korea in 2018. She has large deadweight, is fitted with an exhaust gas cleaning system and is a sister of vessels already in our fleet. We have very good experience with these ships, both commercially and operationally. The price is $107 million and is in line with current broker values. This fleet addition will replace some of the divested earnings following the sale of older ships. The acquisition will be financed with available liquidity and projected new mortgage debt. We expect to take delivery towards the end of this quarter. We sold the DHT Lotus and DHT Peony, built in 2011 at Bohai Shipbuilding in China. The two vessels were sold for a combined price of $103 million. These two vessels were acquired in 2017 as part of the acquisition of BW Group's VLCC fleet for an aggregate price of $115.8 million, and that served us well. The DHT Lotus was delivered in April, and we recorded a capital gain of $17.5 million during the quarter with net proceeds of $50.9 million. The DHT Peony was delivered in July, and we expect to record a gain of $15.5 million in the third quarter with net cash proceeds of $50.1 million. DHT Bauhinia, built in 2007, was fixed on a 1-year time charter contract to a global energy company at $41,500 per day. She commenced the contract in May. Then we acquired minority legacy shareholder positions in Goodwood Ship Management for $6.1 million, and the company is now 100% owned by DHT. The company undertakes technical management and crewing for all our vessels, including recruitment, employment and training of our seafarers through our offices in Singapore and Mumbai, India. The entire DHT fleet has been reflagged to the Marshall Islands registry, and there were some expenses recorded in OpEx related to this during the second quarter. We have entered into a new credit facility to refinance the DHT Jaguar, built 2015. The facility is $30 million with a 6-year tenor and a 20-year repayment profile. It is priced at SOFR plus a margin of 175 basis points and is otherwise in line with the DHT style financing. On this slide, we will provide you with a newbuilding financing update. We have entered into a $308.4 million secured credit facility to finance our four newbuildings. The facility is co-arranged by ING and Nordea with backing from K-Sure. It is competitively priced at SOFR plus an average weighted margin of 132 basis points. The facility has a 12-year tenure and a 20-year repayment profile. We should highlight that the facility does not include a prepayment option in favor of the lenders halfway through the tenor. Hence, it has a true 12-year tenure with respect to both maturity and pricing. The financing underscores the confidence existing lenders have in DHT, our robust financial position, and our strategy. The new building project has a total CapEx just shy of $520 million. We have paid basically $180 million in installments to date. Combined with the announced credit facility of $308 million, we have an estimated $31.6 million in remaining CapEx, which we plan to fund through cash flows from operations and our existing liquidity. We view this as a very comfortable position for the company. Now we will discuss capital allocation and dividends. As per our capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends, the dividend for the second quarter of 2025 is declared at $0.24 per share and marks our 62nd consecutive quarterly cash dividend. The shares will trade ex-dividend on August 18, and the dividend will be paid on August 25, to shareholders of record as of August 18. In the graph to the left, we estimate our estimated P&L and cash breakeven levels for the second half of 2025. As you will see, the difference between the two is estimated at $7,800 per day for this period. This discretionary cash flow will remain in the company and be allocated to general corporate purposes with the intention being to fund the remaining installments under our newbuilding program. The graph on the right illustrates the accumulated dividends since updating our capital allocation policy from the third quarter of 2022. The accumulated amount is now $2.75 per share and reflects well during a period in which our share price has appreciated and we made share buybacks equal to 2.3% of the company in addition to the quarterly cash dividends. Now with an update on the bookings to date for the third quarter of 2025. We expect to have 805 time charter days covered for the second quarter at $40,500 per day. This rate assumes profit sharing for the month of July and only the base rate for the month of August and September for the time charter contracts that have profit-sharing features. We assume 1,150 spot days in this quarter, of which 73% have been booked at an average rate of $38,500 per day. The third quarter started in a disappointing fashion, but we sense a potential turnaround as we speak. The spot P&L breakeven for the third quarter is estimated at $20,000 per day, a number you may use to estimate the net income contribution from our spot fleet for the third quarter. As we have repeatedly stated, it is our view that the dynamics of our market is increasingly being a favorable supply story with a rapidly aging fleet exceeding a benign order book of new ships and a string of sanctions, making it increasingly challenging to trade older ships in the shallow fleet. There are a number of other factors as well that we expect to come into play. The U.S. is proposing tariffs on India's continued import of Russian oil. There are already signals of a shift in India sourcing its feedstock supporting the Suezmax and the VLCC trades. OPEC has announced several increases in production. So far, this has had limited impact on our market. But with peak season for domestic power generation demand in the Middle East nearing its end, we expect the rise in seaborne exports towards the end of the third quarter. We noticed that refining margins are reassuring, supporting demand for feedstock. And Brazil has recently entered into a supply contract for crude oil to China, which is supportive of the VLCC trade. In addition, we see several potential triggers that could act as tipping points in favor for a very strong VLCC market. One, improved arbitrage economics for Atlantic Basin barrels to be sold to Asia; two, escalating levels of sanctions and importantly, enforcement of these; three, re-entry of Venezuelan crude oil into the compliant markets; four, renewed attention to transshipment of sanctioned oil in Malaysian waters; five, de-escalating in trade and tariff tensions; and six, macro tailwinds with a resilient global economy, reasonable oil prices, and a positive Chinese economic read-through. We continue, as always, to focus on what we can control and delivering on what we believe is a resilient business approach and strategy. We receive encouragement from our key stakeholders and the shareholders, customers, and lending banks. Irrespective of which constituency you belong to, you should expect us to focus on solid customer relations with safe and reliable services, a company and a competitive cost structure with robust breakeven levels, a solid balance sheet, a clear capital allocation policy to create long-term shareholder value. We appreciate the encouragement and the entire DHT team continues to work hard and operate with leading governance standards and a high level of integrity. And with that, we open up for questions.

Our first question comes from the line of Frode Morkedal of Clarksons Securities.

The first question I had is about the tariff on India. Could you elaborate on the effects you've seen so far in terms of chartering activity? And do you expect this to continue having a meaningful impact on the conventional tanker market going forward?

It's a bit early to make conclusions, but here are some numbers so far. At the end of the second quarter, specifically at the end of June, India imported roughly 2 million barrels per day of Russian oil, primarily using smaller ships for transport. In July, this volume decreased by about 20%, and we are seeing a similar trend for August. This situation generally favors larger ships. We need to monitor this development closely. There may be some sort of agreement between India and the U.S. that could influence these figures. It's still early to make definitive statements, but a 20% reduction for July and possibly similar levels for August seem likely. We will have to wait and see what unfolds. However, there are already market inquiries for sourcing feedstock from greater distances to be loaded onto larger vessels.

Okay. That's good news. Second question I had is on this fixture. You fixed an 18-year-old ship for 1 year at $41,500 per day, which, given the age of that ship is relatively strong, right? At least when I look at the vessel values, probably $44 million or so for a similar type of ship. If you assume, let's say, a 10%, 12% unlevered return, you only require like $30,000 per day over time to justify that type of valuation, right? So that rate you achieved looks quite strong. So yes, the question is, do you think this kind of fixtures can be repeated? And what does it tell you about the case of higher secondhand values?

I think for the last year or so, we have been quite successful in securing time charters for our older vessels. And all these charters have basically started with a 4 handle. I think the lowest was 40 and the highest was 49.5. And there are several things. This one, of course, is the return on the capital employed in this asset based on the cost, it's a very good return for our shareholders. But also the older ships are a bit more exposed when you get the volatility in the spot market. So when you have sort of weaker periods, then you are sort of exposed to waiting time and maybe fewer customers being willing to fix an older ship unless there's a discount. So to create sort of stability in earnings for those ships, we think has made a lot of sense. And of course, we appreciate that the customers are fine with also using ships that are older. They are in technically excellent condition and they run very well, we believe. So this is something we will try to continue to do, I think, as long as it makes financial sense.

Our next question comes from the line of Sherif Elmaghrabi of BTIG.

So you talked about in the presentation earlier this week, OPEC announced they're going to finish unwinding those cuts earlier than expected. Most of that crude is probably going to find its way onto these. And I'm wondering how that's changed your conversations with charterers given all this unexpected crude entering the market?

Yes. As a company, we have a very sort of key focus on customer relationships, and we have a lot of repeat business with our customer base. And we are regularly talking with them. And we do sort of sense that there is increased interest and focus on having good access to VLCC capacity in some shape or form. And that should bode well for us. And of course, the customers are very close to the action. So if they are increasingly interested in having those conversations, I think this is a bullish signal for the VLCC market and also for DHT.

And for the vessels you sold, Lotus and Peony, you've got two other ones in the fleet of a similar age and a handful that are just a little bit younger. When you think about fleet renewal, is there a focus on maintaining fleet size the way you have with the acquisition of the newer tanker on the water? Or is it more of a case-by-case approach?

Of course, we have a fleet renewal concept in a way, but we are looking at what creates most value for the company. Lotus and Peony had a particular feature that they were built at Bohai Shipyard in China. And given some of the dynamics with the U.S., there were benefits in sort of fine-tuning our proposition to customers. Hence, we decided to sell them. They've also been very profitable investments, and we think we've got a good price for them. And the business that they have mostly been involved in would sort of come to an end because of age. This is a particular trade where they've been active. So it wasn't natural for us to sell them. We had a buyer who would take both the sister ships in one go. And we did replace, of course, one of them, you could argue, with a more modern ship we acquired in the second quarter. We are always on the lookout for new things. I wouldn't suggest that we get to see everything. And we also see things that we pass on. So it's not like we'll buy everything that's being presented to us. But the focus is on creating shareholder value and on earnings per share. So if we can do that confidently for the business, we are still able and willing to invest.

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

Svein, you outlined several potential positive catalysts for the VLCC market. However, you also mentioned that the third quarter has started off disappointingly. It seems we've been anticipating the VLCC to become the top-performing crude carrier class for a while, but it hasn't quite reached that point yet. What do you think has caused this recent disappointment? Additionally, to keep a balanced perspective, what are some negative factors that could hinder VLCCs from performing as you hope for the remainder of the year?

Yes, that's a good question. It's always challenging to provide specific answers. However, we believe the second quarter saw a notable increase in earnings compared to the first quarter, partly due to inventory building in China. When inventory builds up and then suddenly halts, combined with additional barrels from OPEC being used for power generation, this creates a challenging situation. Additionally, the West-East arbitrage for U.S. crude has diminished, coinciding with a slight decrease in production. Reports indicate that U.S. refinery utilization has reached 96%, which is attributed not only to strong demand in the U.S. but also to a reduction in domestic production. These factors contributed to some setbacks as we entered the third quarter, but I perceive this as a temporary issue. I have confidence in Saudi Aramco's expertise in the oil market. The market appears willing to absorb the recent reversals of cuts and the influx of oil. There are still sanctioned barrels at risk, making the future uncertain. The more significant concern, however, is the resilience of the world economy amidst trade and tariff uncertainties. If that resilience falters, it could negatively impact our position. That's the key risk to monitor moving forward.

A little bit of a housekeeping. If I can get a follow-up really quick. It seems like there were some scheduled off-hire days in 2Q. It's been a while since that happened. Can you just give us an update on what the dry dock schedule looks like for the rest of this year and maybe even into '26?

Yes. So we have one ship now in the second half for dry dock.

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

I have a quick follow-up regarding the discussion on India. Svein, you mentioned that volumes from Russia into India have decreased by 20%, which amounts to approximately 400,000 barrels. Do you have any insight on whether that 400,000 barrels has completely left the market, or is it being redirected to other destinations?

From the report that I've read on these details, it is suggesting that the feedstock is acquired from other sources and predominantly the Middle East. But India has sort of widened their sourcing of feedstock. So if you look at sort of statistics over time or pre maybe the Russia-Ukraine conflict, then the Middle East represented about 60% of feedstock and then the rest being sort of Atlantic barrels. So I'm not sure exactly how this has played out now. I guess we'll have to look at this after the fact once these trade statistics come out.

Okay. Yes, I appreciate that. And then just a financing question in terms of the 2018 vessel that you're acquiring. Looking at Jaguar, you've refinanced that with $30 million, which looks maybe to be about 1/3 or so of the value of that ship. What kind of debt are you looking to put on to this latest acquisition?

We prefer to maintain a strong and somewhat conservative balance sheet. We have various financing options for this vessel. There are several factors to consider since we believe we can establish a new cost level for financing secondhand vessels for the company. It is likely to be very competitive, perhaps with a longer term. Therefore, with this specific facility, we may borrow a bit more relatively and use the extra funding to pay down some existing debt and generally improve our debt costs. However, this is still in progress, and we will update the market in due course. Overall, we find ourselves in a very comfortable position, and we anticipate a competitive landscape.

Okay. Good. And then maybe just one final one, then I'll pass it back. The first of your four newbuildings delivers in, say, perhaps maybe 6 months or so. What's the charter appetite look like to take that on charter? And I guess, what's your appetite to do so?

The first ship is set to arrive in January. There has been significant interest from some of our core customers regarding these ships for various discussions, although it may be a bit premature to make any conclusions. These ships are going to be exceptional, unlike anything currently available. They have caught the attention of major customers, and we will have to wait and see. We ordered these ships without any employment contracts and are confident in their market presence. They are poised to be outstanding earners. However, if there are opportunities for long-term business at acceptable returns for DHT, we are open to that possibility. It could turn out to be a combination of options, and we are keen to see how it unfolds. I believe that in the next four to six months, we will have a clearer understanding of how this situation will develop. By our next earnings call, we should have more insight into whether initial interest will translate into genuine business engagement.

Our next question comes from the line of Geoffrey Scott of Scott Asset Management.

Two questions. The first one has to do with demolition activity or actually the lack of the same. The sanctioned fleet, the dark fleet is primarily the over 20s. To the extent that, that dark fleet is highly utilized, there's little incentive to send them to the breakers. Are you able to track the utilization rate of those sanctioned vessels, the dark fleet vessels?

It's limited because they are not always keeping their AI systems on board. So you need pretty advanced satellite systems to keep track of this. There are some companies doing this. So we have access to some of that information. We assume that in the best case, the productivity of this fleet is maybe 50% compared to the compliant fleet, possibly less. So — but they get phenomenal freight for doing these jobs. So they may afford it, and the ships are older. I think the lack of scrapping is — the dynamic is such that people that buy these older ships to operate them in the shadow fleet or sanctioned fleets are paying quite robust prices. And of course, this is then influencing the price shipowners want to sell the ship for demolition. And if you run a scrapyard, you buy a ship, and it takes you quite a while to take it apart and to recycle and sell all the pieces. It's not just the steel. It's also equipment, spare parts, copper from cables, and stuff like that. So the working capital load for a scrapyard is quite significant compared to what it was when an old VLCC cost $10 million. So this is a challenging dynamic. And I've been on record saying, I think you need some global efforts to get this business going because these guys, if they want to finance such an acquisition, they cannot do that with bank financing from a buyer that's sanctioned or has been in sanctioned business. So this whole business sort of stalls. We would need a global effort, somebody like the World Bank stepping up to sanction the demolition of these ships and provide financing for all these breakers for that to happen. Otherwise, the new scrapping will be that these ships will just be abandoned and left sort of with no people on board and the anchor drops somewhere and becomes environmental disasters.

Okay. Another real quick question. Back in April, you announced the financing at SOFR plus 175 bps and then in July, the $308 million facility at SOFR plus 132 bps. Was there something unusual in this facility? Or are banks just more interested in financing the shipping business? Or is DHT just qualitatively better than any of your competitors?

We have a very strong balance sheet, and we've been in this game for quite a while now. So I think our track record in running the company in a sort of credible fashion is there. So we have a very stable group of banks, seven banks that are supporting us. Our leverage is very, very low. And the only thing they complain about is that they cannot lend us enough money. So when we need the debt, it's competitive. Jaguar is a bit of, I think, not a typical financing. It has a combination with part of the newbuilding package, you can say. And it's a bit of an older ship that was refinanced. We expect the acquisition we made now in the second quarter, the 2018 build ship to be priced meaningfully less than that DHT Jaguar financing.

The spread is significantly lower than what your competitors have disclosed. Do you notice that as well?

I think we viewed as an attractive counterpart for our banks. And of course, that is then reflected in the pricing.

There are no further questions. Speakers, please continue.

Well, thank you very much for all listening in on DHT's conference call. We appreciate the interest and support and wishing you all a good day ahead.

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