DHT Holdings, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Q4 2025 DHT Holdings, Inc. Earnings Conference Call. Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Laila Halvorsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings Fourth 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 February 12. 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 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. As usual, we will start the presentation with some financial highlights. In the fourth quarter of 2025, we achieved revenues on an TCE basis of $118 million and adjusted EBITDA of $95 million. Net income came in at $66 million, equal to $0.41 per share. Vessel operating expenses for the quarter were $17.1 million, and G&A for the quarter was $5.6 million, which included approximately $0.6 million in nonrecurring project costs. In terms of market performance, our vessels trading in the spot market earned an average of $69,500 per day, while the vessels on time-charters achieved $49,400 per day. The average combined TCE for the fleet in the quarter was $60,300 per day. For the full year of 2025, we achieved revenues on TCE basis of $369 million and adjusted EBITDA of $278 million. Net income for 2025 was $211 million, equal to $1.31 per share. Adjusted for the gains related to the sale of vessels, adjusted net income was $158 million, equal to $0.99 per share, marking another strong year for DHT. We have a very strong balance sheet with low leverage and strong liquidity. At the end of the fourth quarter, total liquidity was $189 million, consisting of $79 million in cash and $110.5 million available under two of our revolving credit facilities. In December, we drew on this RCF capacity to fund the final installment for our first newbuilding, which was delivered on January 2. This drawdown was repaid in January when we drew on the newbuilding facility. Following these transactions, current availability under our RCF stands at $171.9 million. At quarter end, financial leverage was 17.6% based on market values for the fleet, and net debt was just under $16 million per vessel, which is well below estimated residual values. Looking at our cash flow, we began the quarter with $81 million in cash. From operations, we generated $95.3 million in EBITDA. Ordinary debt repayment and cash interest totaled $13.2 million, and $28.9 million was distributed to shareholders through a cash dividend. $97.6 million was deployed towards vessels during the quarter, which included the delivery of DHT Nokota, our 2018-built secondhand acquisition. We also issued $169.4 million in long-term debt associated with the delivery of DHT Nokota and the delivery of our first newbuilding DHT Antelope. In addition, we invested $107.8 million in our newbuilding program. Changes in working capital and other items amounted to $19.3 million, and the quarter ended with $79 million in cash. With that, I will turn the call over to Svein.

Thank you, Laila. I will now go through our quarterly highlights. We entered into an agreement in June last year to acquire a large quality VLCC built in 2018 at Hyundai. We took delivery of the vessel in November, and it was excellent timing as the freight market was booming. She is named DHT Nokota and trades in the spot market. As we have alluded to in numerous communications, our plan has been to divest our three older ships built in 2007. One of the considerations was timely fleet modernization, selling the oldest vessels in a strong market and replacing these vessels with our newbuilding program of four new vessels entering our fleet during the first half of this year. This newbuilding program was contracted some two years ago when the order book was about 2% of total capacity. We entered into an agreement to sell DHT China and DHT Europe during the quarter for a combined price of $101.6 million. The Europe was delivered on the last day of January, and we expect to deliver the DHT China later this quarter. We expect to book a combined gain of about $60 million during the first quarter. Cash proceeds should come in at about $95 million. The following events took place subsequently to the quarter end. We took delivery of the first of our four newbuildings on January 2. She is named DHT Antelope, setting the tone for this new series called the Antelope Class. She is demonstrating excellent fuel economics during her maiden voyage, exceeding our expectations so far. The remaining three ships will deliver, with two in March and one in June. This is a fully funded project, and no new shares will be issued in this connection. We extended the time-charter for DHT Harrier with a five-year contract at $47,500 per day. The new rate commenced at the end of January. The customer has the option to extend for two additional individual years at $49,000 and $50,000, respectively. Lastly, we entered into an agreement to sell the DHT Bauhinia, our last vessel built in 2007. The price is $51.5 million, and the vessel is debt-free. We expect to deliver her to our new owners in June or July this year and expect to record a gain of $34.2 million from the sale. Back to you, Laila.

Thank you. In line with our capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends, the Board has approved a dividend of $0.41 per share for the fourth quarter of 2025. This marks our 64th consecutive quarterly cash dividend. The shares will trade ex-dividend on February 19, and the dividend will be paid on February 26 to shareholders of record as of February 19. On the left side of the slide, we present our estimated P&L and cash breakeven levels for 2026. Our spot cash breakeven for the year is estimated at $17,500 per day, which reflects the sale of our three oldest vessels and seven special surveys scheduled during the year. This figure captures all true cash costs. The difference between our P&L and cash breakeven is estimated at $6,700 per day, totaling about $56 million for this year. This discretionary cash flow will remain within the company and be allocated for general corporate purposes. On the right side of the slide, we illustrate the accumulated dividends since we updated our capital allocation policy in the third quarter of 2022. The total accumulated amount is $3.34 per share, reflecting strong shareholder returns during a period of share price appreciation. Finally, an update on bookings to date for the first quarter of 2026. We expect 797 time-charter days covered for the first quarter at an average rate of $43,300 per day. This rate includes profit sharing for the month of January and the base rate only for the month of February and March for contracts with profit sharing features. We anticipate 1,195 spot days for the quarter, of which 76% have already been booked at an average rate of $78,900 per day. The spot P&L breakeven for the quarter is estimated to be $18,300 per day. And then I'll turn the call back to Svein.

We have repeatedly addressed the fleet demographics and how it creates an important and robust pillar in our constructive market outlook. We estimate the current sailing VLCC fleet to count 897 ships, net of ships engaged in permanent floating storage. Of this fleet, 427 ships or 46% will be older than 15 years by the end of this year. Similarly, 199 ships or 20% of the fleet will be older than 20 years. And extraordinarily, 49 ships equal to just over 5% of the fleet will be older than 25 years. The sanctioned VLCC fleet counts 151 vessels, of which 105 are older than 20. Twenty-two of the sanctioned ships that are younger than 20 are owned by NITC, the Iranian state-owned shipping line. There are discussions about whether the sanctioned fleet can reenter the compliant market. At first, we would state that for some very minor exceptions, there are hardly any commercial opportunities once the VLCC passes the 20-year mark in the compliant market. This is different for smaller ship classes, with the general rule being that retirement age of ships gets older as ship sizes get smaller. A key message about the VLCC fleet. If and when the sanctioned oil markets become compliant, this could eventually make the sanctioned fleet redundant. Furthermore, there are discussions about whether the order book is growing into oversupply territory. We would argue no. The reasons are illustrated here with a confirmed order book of 171 ships delivering over the next three years. There are some discussions at letter of intent stages, which will likely add some additional orders for the very end of '28, but mostly in 2029. Delivery slots for new VLCCs on offer now are in 2029; hence, the three-year delivery time will unlikely change. Fast forward to the end of 2029, and assuming no scrapping, we will have 528 VLCCs older than 15 and 303 older than 20. These numbers should be put in perspective with the order book. In short, we believe the supply squeeze to be real. As you may have read in the news, a fundamental shift in fleet ownership is taking place with fleet consolidation by private actors gaining meaningful traction. We can say with confidence that this is happening and already making an impact, both on freight rates in the spot market, customer demand for time-charters, and values of secondhand VLCCs. We estimate that the aggregators have gained control of some 120 ships, and we expect their efforts to continue, not too long to control at least 25% of the compliant tramping VLCC fleet, a critical market share. This consolidation is shifting the pricing dynamics and is putting pressure on timely availability of ships. As end-users increasingly take note of this trend, we see rising interest from customers seeking to secure reliability, a reliability that increasingly will command a premium. As crude oil is a feedstock business, one should not expect this consolidation to be trade prohibitive. Crude oil transportation is cheap when measured as a portion of the delivered value of the cargo and slightly disappears in the oil price. As a reflection of the constructive market view we have held for some time, we are increasing our spot market exposure for our fleet by reducing fixed income contracts, i.e., time-charters. Further, we believe the delivery of our four state-of-the-art VLCC newbuildings during the first half of this year to be very timely. You will note on this slide that we expect our spot market exposure to reach around 75% of our capacity during the second quarter. This enables us not only to participate in the rewarding spot markets to a greater extent than for some time but also, in due course, develop new time-charter contracts at improved rates. As we enter 2026, the VLCC market is undergoing a structural transformation. We are navigating a perfect storm of strong demand, geopolitical volatility, a rapidly aging global fleet, and significant consolidation of the compliant tramping fleet. At DHT, we are not just observers of this cycle. We are well-positioned to benefit from it. We have an excellent fleet in the water and execute a timely renewal with state-of-the-art VLCC newbuildings delivering into a strong market, financed without issuing a single share. We have increasing market exposure and a clear mandate to return earnings to our shareholders. We look forward to an exciting and rewarding 2026. And with that, we open up for questions.

We will now take the first question. This is from John Chappell from Evercore ISI.

Svein, putting Slides 11 and 12 together, the commentary about the consolidation and then you're increasing spot exposure to 74%. The comment on the aggregator and charters looking for reliability and the premium associated with that. When I first read that in the press release last night, it sounded like that was conducive to a much stronger time-charter market. And we saw one of your Norwegian peers sign 8 ships at absurd time-charter numbers, lacking a better term. So can you help us kind of reconcile those? Do you think that there are going to be other opportunities like that even better than what you just renewed the Harrier at? So that spot market exposure increase may be kind of short term?

I can confirm that. So I would say basically, all end-users or customers now are in the market to secure time-charters for a variety of tenors, mostly 1, 2 or 3 years. And the rates that they are being offered are above the last bump. The aggregator, so to speak, is not really in the market to offer ships for time-charter, at least not as we have seen, and we doubt that it is happening. So it's really the remainder of owners that potentially will consider this. And I think today, there are rumors of a one-year charter at $85,000 a day. So we'll have to see if that happens, but I think that's on subs apparently. So that's a reflection of a step-up from the last one on one year. And also, we are aware of customers bidding on three-year charters, certainly at numbers quite above what you would assume to be the last on. So I think in general, customers are a bit worried about reliability and not really having access to ships or potentially being held hostage to a market where ships are being held back for some reason, right? So it's a very interesting dynamic, and it's already sort of taking shape. So we see the contours of how this is working out.

Okay. And then just you've done a deep dive on the supply side, so there's no reason to really rehash that. But the commentary on the last slide about demand, it looks like global oil demand growth is kind of stabilizing around 1%, and there's a lot of talk about the market becoming oversupplied with OPEC production at the current levels and China really being the only incremental buyer. Is that demand commentary more about ton-mile demand, more about disruption, sanctioned vessels, new trade routes? Or is it really more of a commentary on just an underlying robust consumption?

I believe it depends on how numbers are presented and analyzed. When the 1% figure is mentioned, it refers to total liquids, which is about 83 million barrels a day of crude, with the rest being other liquids, bringing the total to roughly 103 million. Currently, seaborne crude oil transportation is around 41 million barrels a day. The additional 1 million barrels of crude oil entering the market will be entirely seaborne, so that figure should be considered in relation to the 41 million barrels, not the 103 million. When you do that, it represents approximately a 2.5% demand growth. Also, as you pointed out, the distances matter; oil from the Middle East has shorter transportation distances compared to some Atlantic crude. U.S. production this year seems to be stable, but discussions with major companies indicate they are finding efficiencies and lowering costs, which will likely lead to increased production. Guyana is growing quickly, and we anticipate significant growth in Brazil this year as well. All these factors give us reasons to be optimistic about demand growth. However, it's important to understand the distinction between total liquids demand and seaborne crude oil demand.

We'll now take our next question. This is from Frode Morkedal from Clarksons.

On this aggregators controlling 25%, can you maybe translate that into a vessel count or clarify how you define the compliance fleet? Because when I look at 130, 120 ships, that's just probably 18% or something like that. So just a clarification on that first.

You need to exclude the sanctioned fleet, as it doesn't truly operate in the market. Additionally, there are many state-owned ships that primarily serve as a shuttle for their owners. For instance, China controls about 100 VLCCs, with a significant part of that fleet transporting oil from the Middle East to Chinese refiners. Saudi Arabia and Japan also have substantial fleets. These vessels aren't typically available in the open market; some might occasionally be free or undergoing replacements due to scheduling conflicts, but you don't often see them in the usual spot market. When we factor this in, a reasonable estimate would suggest that around 600 ships, perhaps even slightly fewer, might be in circulation. This is why we feel it's reasonable to present that number. It seems fair to assume that about 25% of the compliant tramping fleet will be affected by this consolidation.

Okay. Understood. So you're not really saying that they will add even more ships to reach 25%. They already have that.

We understand in the market that they are looking to acquire additional ships. And as a company with ships, chances are maybe we also get the old phone call if you want to sell ships, and we're done selling. So I think ambitions are certainly there to do more. So let's see where it ends up.

Interesting. On that note, I guess I have two questions on that. First, is 25% enough to meaningfully, let's say, shift the market dynamics? And how so? What mechanism will it be?

I think so. I think because if you look at the types of ships that are being acquired, they're predominantly in the 10- to 15-year age bracket. And most of those ships that are being sold have been owned by owners with maybe two, three, four, five ships. And they occasionally have a little bit different behavior in the spot market. So if the aggregators are sort of getting all those ships under some sort of commercial umbrella, you will have, I think, a different pricing behavior and a different flow of information, importantly to those in the industry, right? So if you are a big operator like DHT and some of our peers, you basically have ships in the market all the time, and you have very good information flow and access to pretty much all the business. But if you own two or three ships, there could be quite meaningful time between every time you fix, so you might not always have a full flow of information. Although I don't need to be disrespectful of these owners, but to be in the market all the time has a benefit, right? So I think the dynamic is certainly going to change because of this.

That's very interesting. Last question I had is basically on the same topic because this company we're discussing has clearly been a willing buyer, right? And many owners, shipowners have been willing sellers, and ship values have moved higher. I guess you basically said that they will probably buy more ships, right? But one of the questions I often get from investors is that are there further bringing buyers at current levels, right? And how do you see vessel values being maintained at these lofty levels?

They are not the only buyer. So there are other buyers for ships in the sort of the older spectrum, I would say, ships predominantly built before 2010, '11. So there are still buyers there at sort of levels we just have sold our older ships at. There's also been, I would say, more than a handful of transactions on modern secondhand plus/minus 5 years of age. And all of those transactions were bid up in price, and there were competition, right? So there's very few modern ships to buy, and some buyers have been willing to set a new market to get those ships. And these are credible buyers, right? And I don't think they are the only buyer in the market. So in general, people are very bullish, and I understand why. So I wouldn't say it's sort of the end of the buying period just yet.

That's good to hear. And I guess current time-charter rates basically justify those ship values, right? So that's good.

Great. There you go.

And the next question today comes from the line of Greg Lewis, BTIG.

I wanted to discuss the consolidator and connect it to your fleet. From what we've observed, their focus appears to be on older vessels, particularly those 10 years and older, and in some instances, 15 years and older. I'm curious if they have also been considering more modern or younger ships that we might not be aware of. Regarding your fleet, it's clear you've disposed of the last 2007 vessel, but time has passed, and we are beginning to see some vessels approaching 15 years old. I'm interested in your perspective on those vessels that are now in the 15-plus year category.

So we are done selling for now. So we have five ships that are built in 2011 and 2012. They're fantastic ships, large deadweight, excellent fuel economics, very, very good condition, and they serviced both us and our customers very well, earning top dollars in the market. So they're not going anywhere but staying in the DHT fleet.

Has the consolidator been considering more modern vessels? I'm trying to understand if they're interested in bidding on ships that are seven years old or newer, especially since we recently acquired a vessel from 2018.

Yes, I believe that's the case, although I can't say for certain. I find their approach to the age range of 10 to 15 quite rational. I don't think they're rigid about it, but if they can achieve what it seems they intend to, the cash return on those investments will be substantial. It appears to be a solid starting point in their strategy. From my perspective, we have a different approach because we are focused on the long term, servicing some demanding customers, and we also need to renew our equipment in a timely manner. So, I find their actions to be logical.

Okay. Yes. Just maybe just because it's a private company and they're able to do things differently. And I did have a question about the broader market and realizing it's kind of only been a couple of weeks, and it's a work in progress. But just given what's happened in Venezuela earlier this year, have we started to see signs of that impacting, i.e., crude flow replacements that were previously from Venezuela coming elsewhere? And kind of curious how you see that playing out, just assuming that all that Venezuelan crude that had been heading, I guess, primarily to Asia, if that kind of has to deviate maybe more to the U.S.

Yes. So it's early days, right? But I think the barrels that are going to move now initially will, from what I read, predominantly go to the U.S. But there are some dynamics there. One of the biggest creditors in Venezuela is China. And that sort of financing that they have provided in the past is supposed to be repaid in oil. So if they're going to sort of settle the debt, so to speak, with bonds and all these things and get that sorted, I would guess China would want their hands on some of that oil. And we have seen now read that Trafigura and Vitol are being engaged as traders or marketers of this oil. And I think we should expect that some of this will be placed in Asia. The key now, of course, is how quickly can they ramp up production. I think the sort of lighter products that they have, which are offshore, are probably easier to get going than some of the heavier stuff in the Orinoco Delta and bitumen and oil emulsion and stuff like that, and whether they're going to be able to blend into the sort of major grade. So this will probably take a bit longer time. But of course, they have vast resources, right? And it will be great for the country if they can gain traction on this capital invested and get the production up. So I just think this is going to be good for the markets, absolutely.

And just to that point, right, you mentioned Trafigura and I believe Vitol stepping in to kind of move some of that oil out of Venezuela, I guess, not historically, but at least the last couple of years, it's been moved on shadow fleet. Is there a process to those entities bringing online companies like DHT, hey DHT, realizing that Venezuela has not been a place you've been going to before. Is there like a process in getting companies like you on board so that we're able to move this oil on, I guess, the mainstream fleet?

It has to be. But I think it's fair to assume here that say it's Trafigura and Vitol that will sell this oil; they will hold the title of that oil, right? So they will be our customer. And of course, it has to be clear that there's no OFAC risk for a company like DHT in moving that oil. So we haven't seen any of this yet, but I think everybody sort of expects and understands that, that has to be resolved in a proper fashion.

We will now take our next question. This is from Eirik Haavaldsen from Pareto.

I just wanted to ask you about your balance sheet because, of course, with the cash flows you're now generating and with the vessel sales you've announced, you're quickly getting back to even after all these investments or the investments you made now in newbuilds and Nokota. I mean, you're getting down to a level below scrap very quickly. So what's your thinking there? What's the ideal level of debt? Because on an LTV basis, I think you're down to levels you haven't really been at before?

I think it's important to make a distinction between book debt to book and debt to market value. So market values now, of course, have been going up. So then that leverage is sort of in the teens, as Laila spoke about earlier. To book, it's about 26.5% or thereabouts. I think over time, ideally, we want to continue to invest and grow the business. Right now, it's a bit hard to find meaningful investments. But to have that capacity in the balance sheet and do this organically and not being reliant on printing new shares has been an important target for us. I think secondly, our dividend policy is also an important pillar in structuring that; there is a meaningful delta between P&L and cash breakeven because you always need some cash being retained in the company for other purposes than paying out dividends. And if you start to leverage up too much, then you close that delta, which means you will have basically no cash flow left in the company or very little. So that's not an ideal scenario. So it's not I cannot sort of give you or guide you on a specific percentage or a magic number. But these are sort of general things that we think about when we do this. We looked at some secondhand opportunities sort of at the end of last year, but prices ran away from us. So we didn't do anything, obviously. But that stuff we have capacity to do to pick up a couple of modern ships without any new capital. So we want to have that capacity.

I mean, there's been a lot of talk, obviously, on this call as well about this consolidated pushing values higher. But I guess another thing is also shipyards and newbuild prices and weaker dollar and backlogs that are increasing and so on. So where do you see newbuild prices headed over the next year? And I guess also with regards to your fleet because you cleared out now all the Chinese-built vessels. Are Chinese vessels or I guess, vessels under construction in China of interest to you? Or will you now have a sole Korea focus, which I guess can be valuable over time?

We have nothing in principle against ships built in Chinese shipyards. We have potentially maybe a couple of yards that we prefer over others that have less experience in building ships. I think importantly now, this USTR issue between the U.S. and China is postponed until November. So we'd like to see some clarity on that before we make final decisions on this. But a significant portion, probably 70% now of the order book for these are in China. And I think it's going to be hard to disregard it. So it's just a question of how we can potentially approach that going forward. But I think nothing is going to happen on our side just now. We have to wait a little bit.

But the vessel now delivering, I guess, first half '29, what would the price be?

I think plus/minus $130 million. One yard is just below, and the other is just above. And it's far out, right? So I think to deploy capital now that will not work is the challenge. Of course, we have some RCF capacity we can repay and save some interest expense, things like that. So it's just a question of making all this sort of work sufficiently, but at the same time, also sensibly for the company. So maybe there will be some reset opportunities at attractive prices at some point. Right now, I would think chances are no, but that can change.

At least the earnings are too high, I guess it's a good problem to have.

We will now take our next question from Geoffrey Scott from Scott Asset Management.

Has there been any resolution of protocols for demolition of the noncompliant fleet?

That's a good question. So we understand now that one of the two largest cash buyers in the demolition market is now seeking to get approvals, especially now from the U.S. and OFAC to transact with counterparties that have been sanctioned in order to acquire these ships and get them demolished. So I don't really have an update as of today on what the status is. But I think it makes a lot of sense for everyone to get this resolved and get that activity going because we have some of these ships now that are very old and in the shadow fleet that are losing out on work because conditions or maybe some crew don't want to work on them and things like that. And so they will have to go. I think this will happen, and I think it's good news that at least one of those cash buyers is pursuing this. I would suspect that maybe the other big one is doing something similar, although I haven't heard the name specifically, but I would guess that they will be looking into the same, so we can get that activity going.

Do you think this will get resolved sooner rather than later?

Yes. I wish I could be more specific. I don't know. And I don't know the process with, I guess, OFAC and how it will work and what sort of political support you need or whether it's a technocratic decision. I don't know the process. So I'm sorry, I can't give you better guidance. But I think we take some encouragement that there is a process that has started.

There are no further questions coming through, so I will now hand back to you for any closing comments. Thank you.

Well, thank you to all for listening in on DHT, and we appreciate your interest and support and wish you all a great day ahead. Thank you.

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