Good day, and thank you for standing by. Welcome to the Q2 2025 DHT Holdings, Inc. Earnings Conference Call. [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, 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 Moxnus 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…

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 has 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 agreement to acquire a modern secondhand vessel built at Hyundai, South Korea in 2018. She has large deadweight, is fitted with 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…

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

The first question I had is on the -- you mentioned it briefly, this tariff on India. Maybe you could elaborate what kind of effects you've seen so far in terms of chartering activity? And do you expect that to continue basically have a meaningful impact on the, let's say, conventional tanker market going forward?

It's a bit early days, but some sort of numbers so far. At the end of the second quarter, so i.e. end of June, India imported basically 2 million barrels per day of Russian oil. And this oil was transported predominantly in smaller ships. For July, this has come down some 20% in volumes, and we see also similar sort of trend lines for August. And this will in general is in favor of larger ships. So we have to, of course, continue to see this development. There could, of course, also be some sort of deal with India and the U.S. that will maybe not take out all of this. But -- so it's a bit early to say. But I think a 20% start for July, maybe similar levels for August, if not more. And then let's see what happens. But there are already inquiries in the market for them to purchase feedstock from further FR to be loaded on big ships.

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, 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 look 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 less 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 -- for us, 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 the money makes 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 on to 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 the DHT then.

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 will build at Bohai Shipyard in China. And given some of the dynamics with the U.S., there was some 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 the more modern ship we acquired in the second quarter. We are always on the lookout of new things. I there suggest that we get to see everything. And we also get to see things that we pass on. So it's not like we'll buy everything that's being presented to us. So -- 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, on the market commentary, you laid out all the possible positive catalysts that could happen in the VLCC market. And -- but you also said the third quarter started out somewhat disappointing. So it feels like we've been waiting for this VLCC reversion to be in the best-performing crude carrier class for some time, and it's just kind of stubbornly hasn't gotten there yet. So maybe what's been, in your mind, the reason for the disappointment recently? And I guess just to be balanced, what are some of the negative potential catalysts that can keep the VLCCs from performing as you expect for the rest of the year?

Yes. That's a good question, of course, and it's always difficult to be very precise on this. But we do believe that -- well, the second quarter had a significant markup in earnings compared to the first quarter. And I think some of that has been inventory building in China. And then when you build inventory, then suddenly that comes to a halt or a temporary halt. So that, combined with the additional barrels from OPEC suddenly being then used for power generation has not been a good combination also with the loss of the sort of West East arbitrage of the U.S. crude, where also production, frankly, has tapered off a bit. And I read reports now that the U.S. refining -- refinery utilization is now up to 96%, that is not only because of demand growth or robust demand in the U.S., but it's also of some domestic production tapering off. I think the combination of these factors is what sort of now gave us a little bit one on the nose coming into the third quarter. But I do sense it's temporary. So -- and I view Saudi Aramco, in particular, I don't think there's anybody else that knows more about the oil market than those guys. So I have some confidence in them knowing what they're doing. And if you look at the oil price, the market seems to be willing to absorb these reversals of cuts and that oil coming to the market. There's still sanctioned barrels at risk here. So exactly how this will play out is hard. I think the bigger question in terms of risks is so far, the world economy has shown resilience to a lot of the, call it, noise or uncertainty created by trade and tariff discussions. So if the world economy is not able to hold up that resilience, then of course, that will have a negative impact on where we are. But -- so I think that's really the key risk is the latter to see how that really plays out. So far...

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.

A couple of quick ones for me and maybe just a follow-up to start on the India discussion. Svein, you mentioned volumes from Russia into India are down 20%, which is, say, 400,000 barrels. From your sense or from -- if you're able to see, has that 400,000 just disappeared from the market? Or is it being shipped somewhere else?

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 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 like to run with a strong and maybe for some people, a bit of a conservative balance sheet. So we have several offers to finance this vessel. There are different considerations because we have a sense that we can set a new level of cost in financing secondhand vessels for the company. So it will be probably very competitive, maybe a bit longer tenure. So maybe we -- on this particular facility, we'll borrow on a relative basis a bit more, but use maybe that excess funding to prepay some other debt and just improve the general cost for debt for the company. So -- but this is sort of stuff in the works. So we will advise the market in due course on that. But it's a super comfortable position to be in. And so it's going to be competitive, we think.

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 coming in January. And there's been, I would say, high-level interest from some of our core customers in these ships for sort of different type of discussions, but it's a bit early yet. So -- but these ships are going to be very, very good. I think there's going to be -- well, there's nothing like it in the water today. So they do attract interest from some big customers. So let's see. It's -- we order those ships without employment and are comfortable of keeping them also in the market. They're going to be phenomenal earners. But if there's some true long-term business available to those at acceptable returns to DHT, then of course, we will entertain that. So it could be a mix, and we have to see. I do think that the next sort of 6 months or maybe less 4, 5 months will give us a better feel for how this will develop. So maybe on our next earnings call, we have a better view is maybe the wrong word, but we have more clarity on whether initial interest will actually develop into real business interest.

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 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 on 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 maybe can afford it and the ships are older. I think lack of scrapping is -- the dynamic is so that people that buy these older ships for -- to operate them in the shadow fleet or sanctioned fleets, they are paying quite robust prices. And of course, this is then influencing the price shipowner wants to sell the ship for demolition. And if you run a scrap yard, you buy a ship and it takes you quite a good 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 breakyard 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 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 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 substantially lower than what's been disclosed by your competitors. Is that -- do you see 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.