DHT Holdings, Inc. Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the Q1 2026 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 speaker today, CFO Laila Halvorsen. Please go ahead.

Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings First Quarter 2026 Earnings Call. I'm joined by DHT's President and CEO, Svein 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 May 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 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 first quarter of 2026, we achieved revenues on TCE basis of $157 million and adjusted EBITDA of $133 million. Net income came in at $164.5 million, equal to $1.02 per share. After adjusting for the $60 million gain on sale of DHT Europe and DHT China and a non-cash fair value gain related to interest rate derivatives of $1.1 million, we had ordinary net income for the quarter of $103.4 million equal to $0.64 per share. Vessel operating expenses for the quarter were $19.1 million, which included approximately $2 million in non-recurring costs related to spares and consumables. G&A for the quarter was $5 million. In terms of market performance, our vessels trading in the spot market earned an average of $91,700 per day, while vessels on time charters achieved $61,300 per day. The average combined TCE for the fleet in the quarter was $78,800 per day. We continue to maintain a very strong balance sheet, supported by conservative leverage and robust liquidity. At the end of the first quarter, total liquidity was $350 million, consisting of $126 million in cash and $230 million available under our two revolving credit facilities. Following the repayment of $56 million in April under the Nordea revolving credit facility, current availability under our two RCFs stands at $285.8 million. At quarter end, financial leverage was 16.8% based on market values for the fleet and net debt was $16.5 million per vessel, which is well below estimated residual values. Looking at our cash flow, we began the quarter with $79 million in cash. From operations, we generated $133 million in EBITDA. Debt repayment and cash interest totaled $20 million. Proceeds from sale of DHT Europe and DHT China amounted to $201 million and $66 million was distributed to shareholders through a cash dividend. $2.8 million related to investments in vessels and $160 million was deployed towards investments in vessels under construction, which included delivery of our first three new buildings. We also issued $91.5 million in long-term debt. Changes in working capital and other items amounted to $30 million, and the quarter ended with $126 million in cash. With that, I will turn the call over to Svein to go through the quarterly highlights.

Thank you, Laila. We are very pleased with the well-timed delivery of the first three of our four newbuildings in the Antelope class. The DHT Antelope delivered in January, the DHT Addax and DHT Gazelle in March. The fourth vessel, DHT Empower, is expected to deliver this summer. This represents fleet renewal in conjunction with planned divestment of our three older ships built in 2007, two of which have been delivered. The last of the three, DHT Bauhinia, was sold for $51.5 million in the quarter and is expected to deliver in June or July. We expect a capital gain of $34.2 million and cash proceeds of $50.5 million from this last sale. Our planned increase of market exposure for the first half of this year had the objective not only to benefit from the spot market, but also to balance this with selective new term employment. It has been a busy period with numerous contracts secured. First, the DHT Harrier built 2016 with their existing time charter due to expire, extended the contract for five years from January 26 at $47,500. It has two optional years priced at $49,000 and $50,000. We then secured three new one-year time charters: DHT Opal built 2012 for one year at $90,000; DHT Taiga built 2012 for one year at $94,000; DHT Redwood built 2011 for one year at $105,000. Further, one of our newbuildings delivered into a five- to seven-year time charter with a key customer. Subsequent to the quarter end, we secured two additional one-year time charters for DHT Sundarbans built 2012 and DHT Amazon built 2011 with an average rate of $109,000 per day. As such, our five older ships are then out on one-year time charter contracts averaging $101,000 per day. 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 $0.64 per share for the first quarter of 2026. This marks our 65th consecutive quarterly cash dividend. The shares will trade ex-dividend on May 21, and the dividend will be paid on May 28 to shareholders of record as of May 21. Here, we also present our estimated P&L and cash breakeven levels for the last three quarters of 2026. Our P&L breakeven for the period is estimated at $29,700 per day, while our cash breakeven is estimated at $23,400 per day, which reflects all through cash costs. The difference between our P&L and cash breakeven is estimated at $6,300 per day for the last three quarters. This discretionary cash flow will remain within the company and be allocated for general corporate purposes. On this slide, we present an update on bookings to date for the second quarter of 2026. We expect 997 time charter days covered for the second quarter at an average rate of $73,900 per day. This rate includes profit sharing for the month of April and the base rate only for the months of May and June for contracts with profit sharing structures. We also anticipate 1,025 spot days for the quarter, of which 88% have already been booked at an average rate of $168,300 per day. The spot P&L breakeven for the quarter is estimated to be less than zero as the time charter earnings are expected to exceed forecasted costs. Turning to our 2026 dry dock schedule: as shown on this slide, we have seven vessels scheduled for dry docking during 2026. DHT Lion completed its second special survey in dry dock in the first quarter, and this was completed on time and within expectations. Looking at the remainder of the program, four vessels—DHT Osprey, DHT Panther, DHT Puma and DHT Harrier—are scheduled for their second special survey in dry dock. In addition, DHT Amazon and DHT Redwood are scheduled for their third special survey in dry dock. Overall, the 2026 dry dock schedule is well planned, fully incorporated into our operating and capital expenditure outlook and does not change our underlying view on fleet availability or cash flow generation. Importantly, this reflects our continued focus on maintaining a high-quality fleet while preserving operational reliability and asset value over the long term. And then I'll turn the call back to Svein.

Thank you, Laila. We will now spend some time on what we see as the current market pillars, the future catalysts and our strategic positioning. We will start with the current market pillars. The VLCC market is, in our view, influenced by the following primary drivers. First, the basic supply-demand fundamentals continue to support freight rates as evidenced during the second half of 2025 when the freight market strengthened without any special events taking place. Second, we experienced strategic fleet consolidation with the market structure having been strengthened by significant consolidation activity from a private aggregator during the first quarter of 2026. This is a historical first and the fleet demographics and fragmented ownership made this truly possible. We don't see this effort as a fly-by-night and expect it to positively influence our market going forward. Third, risk premiums driven by regional volatilities involving Iran have introduced significant risk premiums on certain trade routes, resulting in substantial earnings differences between the various trading routes. This is not a fundamental driver, but it has alerted the entire industry to how vulnerable it is to curve balls. Fourth, near-term loss in crude oil available for transportation from the Middle East Gulf is a risk. We believe, however, that this could be compensated by reduced vessel productivity through: one, increased transportation distances as refiners source barrels from further away; and two, approximately 10% of the VLCC fleet being tied up either with cargo waiting to exit the Gulf or waiting to load from Saudi Arabia's Western export facility. For the sake of good order, we had no ships inside the Gulf when the conflict broke out. We have no ships inside currently, and our fleet is fully operational. Now let's discuss the future catalysts. We believe several emerging trends warrant specific attention as they are expected to provide longer-term tailwinds for the large tanker market and our operations. Sanction relief and trade normalization: assuming conflicts will be resolved, potential sanctions relief on Venezuelan and Iranian crude exports would likely shift volumes from the shadow fleet to compliant operators, thereby expanding the addressable market for our vessels. Fleet modernization and demolition: we anticipate that the shift toward compliant trade will deprive the aging non-compliant shadow fleet of employment, likely accelerating the retirement of substandard tonnage and further tightening global vessel supply. These two trends in combination could shrink the working fleet by 10% to maybe 15% of capacity. Energy security and inventory replenishment: a heightened focus on national energy security could trigger long-term crude oil inventory building, supporting transportation demand beyond immediate consumption needs. This trend will likely change customer behavior from just-in-time to just-in-case. Finally, DHT's strategic positioning: consistent with the outlook presented in our previous reports, we observed that end users are increasingly seeking to secure vessel capacity in response to tightening market conditions. As you will have noted, we positioned our fleet for the first half of the year to seize on this development, capturing spot market rewards while selectively securing term employment to reduce volatility and enhance earnings visibility. The delivery of our four VLCC newbuildings this year is proving well timed with one vessel already commencing a long-term charter with a key customer. Our disciplined capital allocation policy remains a priority, ensuring that the positive market development and our positioning will reward shareholders through quarterly cash dividends equal to 100% of ordinary net income. With that, we open up for questions. Operator?

Our first question comes from John Jonathan Chappell of Evercore.

So, starting with that last slide on strategic options, a quick two-parter. Obviously, you signed a lot of contracts at rates that no one could blame you for. Could you just help with the Gazelle rate? It's the one that wasn't disclosed in the press release and can help with transparency. And two, I know you like to keep some spot market exposure, keeps you in the conversation, helps you understand flows. Even though the rates are still somewhat elevated and generating fantastic returns, do you think for the most part you'd like to keep the remainder of the fleet in the spot as you see the information flow?

Thank you, Jonathan. As for your first question on the rate on that vessel, that is the explicit agreement with the customer not to disclose the rate. So we are not at liberty to do that. I apologize for that. Secondly, for this year, we are now approaching 50% coverage on time charter. Keep in mind that two of those ships have base rates with profit sharing elements on top with no ceilings, so they are partly participating in the spot market. When it comes to adding term business, we are quite content for now, and we might revisit this later on. But as of this moment, we are very satisfied with the general positioning of the company and the opportunities we see ahead.

Okay. Great. And then for a follow-up, just kind of understanding the operational challenges and opportunities since your last conference call. Obviously, we're seeing these headline rates that are eye-watering, but they're very inconsistent depending on where the source is. When we see a headline rate, do we assume that that's something that DHT can achieve? Or do we have to take into account maybe some theoretical elements of that? Is there more waiting time or ballast time as you're moving the fleet around to areas that are maybe safer for the crew and also taking into account bunker fuels? Just trying to understand when we see a number, is that a number that you can really get? Or are there a lot of different elements in it that maybe it's not quite the headline rate?

Yes. So the most referred-to index and route has been what is called TD3C, which is cargo loaded in Saudi Arabia and discharged in China. Obviously, that route has not really been operational in general terms of the market with some exceptions, as many shipowners were not entertaining entering the Persian Gulf. So it has produced derivative pricing on two other load ports in the region: one being Yanbu, which is in the Red Sea, i.e., the western load ports of Saudi Arabia; and secondly, Fujairah, which is outside of the Strait of Hormuz, in the UAE. Those pricings have been below the TD3C, but certainly related to that there are many similarities to the trade. But I think it's fair to say that there's a limited number of ships that have captured what the TD3C index has referred to in the market. That's just the nature of how the game has been played in the last few weeks. On our part, we managed to keep our fleet efficient without any operational disruptions. We have not taken on any excessive ballast or cost or expenditure to keep our fleet going. We're trying to stay ahead of the game a bit. We've done a fair amount of business from the Atlantic, where we also have a big COA with export of oil from the Atlantic Basin to Asia, so that has also occupied a few ships. On our part, we haven't really been impaired on our earnings, if I can say it that way.

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

Starting with the fleet, your sale of your oldest vessels lines up pretty nicely with the delivery of newbuilds this year. So looking ahead, I'm curious how you're thinking about continued fleet growth. It seems like there's a fair amount of on-the-water opportunity, but maybe that tonnage skews older.

Yes. We are very happy with the fleet that we have, and there are no ships in our fleet currently planned for divestment. We have a balance sheet that is able to entertain fleet growth, so we're always on the lookout for opportunities. Right now, that's been very hard to find, frankly. I wouldn't say because there have been other competing buyers for ships, but the competition has been a very healthy freight market. Potential sellers have opted to retain their ships in operation to earn money. But as I said, we would like to continue to build DHT, so at some point, hopefully, there will be opportunities for us to invest in additional ships for the fleet.

Got it. And then second question: you talked about the risk premium from the war in Iran. Obviously, that—hopefully—ends sooner rather than later. But whenever it does, how quickly could we see activity return to the Gulf? And more specifically, obviously, charters want you to go back as soon as possible. But what are some of the trade-offs you have to consider, like mariner risk or insurance coverage, stuff like that?

I think we need to see a high level of credibility to a resolution to the conflict and that we can expect whatever agreements that will be put in place can last. In all fairness, the news flow over these last two weeks has been rather volatile with good news and bad news almost trading each other every second day. So we cannot react to good news one day and assume we can all enter the next day and the market goes back to normal. I don't think we will be alone in considering the situation like that. Credibility to a solution has to be in place, and I think that will take a bit longer than just a few more days. The key action we need to see now is that all these ships that are trapped inside the Gulf can exit safely. That will take a while. We believe there are some 57 VLCCs inside the Gulf with cargo that is waiting to exit, plus there are a lot of other ship types inside that are waiting to resume operations. A lot of this has to be unwound to demonstrate that the passage through the strait is safe.

And our next question comes from the line of Omar Nokta from Clarksons.

Maybe just a follow-up a little bit on the discussion points of Hormuz and risk premiums. Are you able to talk a little bit about how, from your perspective, the risk premium across the different routes for getting inside Hormuz has developed as this crisis has gone on? You mentioned Yanbu and Fujairah. Can you talk a bit about how that risk premium has developed and also your willingness to transact in those areas?

Yes. Firstly, to entertain trades inside the Strait of Hormuz was a non-starter for us. We think it's also a very easy decision. We have an average of 25 employees on board our ships and to expose them to trades like this is not something we are willing to discuss. Secondly, I think initially Yanbu and Fujairah also had at least some perceived risk. As people have gotten more comfortable with these areas, those freight levels have moved differently from where the Persian Gulf freight potentially could be. They are now closing in to be more aligned with what Atlantic trades are offering. As of now, there's not a really big delta between these. There could be some positional issues and logistics, but I see some normalization in pricing in Fujairah and Yanbu compared to the rest of the markets.

Okay. And then how do you think about, in a reopening scenario—let's say things go back to normal, which is difficult to anticipate—how permanent are these new routes or at least the increased activity on these routes? Do you think these are here to stay and how does that affect the market long term?

Yanbu in the Red Sea has the capacity for very efficient operation—about 4 million barrels a day—so they can load two VLCCs a day. That is not a new trade; that terminal has been there for many years and has served certain markets, maybe not to full capacity. I think whether that route keeps that capacity or whether some of that cargo shifts back to the Gulf doesn't really impact the general efficiency of the market because it's a very similar type of duration for those voyages. Regarding Fujairah, in the near term, it's a bit hard to say. We are curious to see how the UAE's exit from OPEC will unfold. I think they have had ambitions for some time to increase their quotas. As they become free from OPEC, they will also be free to decide how much they will produce and whether that will go out of Fujairah only or also from ports inside the Gulf. We don't yet know the ratios and how that will play out, but we should expect more cargo in the water in general, which may put downward pressure on oil prices but will stimulate our business overall.

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

I have a question about the couple of ships that are on long-term charter with profit sharing. I've always thought that the 50-50 split for profit sharing was a very fair division of risk and reward for the long-term chartering market. But it requires some estimate of what that profit sharing is. How do you get to the profit sharing number? Index?

Thank you for asking. We don't disclose the details of these contracts. But the profit sharing mechanism is calculated on each ship's particular specification for fuel consumption and efficiency, all of that. It is an index-based profit calculation. One charter has only one index as the pricing base and the other one has a mix of indices. None of these contracts are frustrated in any way by the recent market changes. We also note that there is someone now pursuing a case in the Baltic courts—whether that case has a probability of going one way or the other, I don't know. But again, the pricing basis in our charters is operational, and we get paid by our customers, and there's no frustration in these systems.

There is no conflict in that conversation.

No.

There are no further questions at this time. So I'll hand the call back to Svein for closing remarks.

Thank you very much to all for being interested in DHT, and wishing you all a good day ahead. Thank you.

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