DHT Holdings Inc (DHT) 2011 Q4 法說會逐字稿

Good day and welcome to the DHT Holdings Q4 results 2011 conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Eirik Uboe. Please go ahead, sir.

Thank you and good morning.

Before we get started I'd like to make the following remarks. This conference call is also being broadcast on our website at DHtankers.com and a replay of this conference call will be available on the website. In addition a form 6-K evidenced in this news release will be filed with the SEC.

As a reminder this conference call contains forward-looking statements that are governed by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements which include statements regarding DHT's prospects, the outlook for tanker markets in general, expectations regarding daily charter hire rates and vessel utilizations; forecast over the economic activity; oil prices and oil trading patterns; expectations regarding seasonal fluctuations in tanker demand; anticipated levels of newbuilding and scrapping; and projected drydock schedules involve risks and uncertainties that are more fully described in our filings made with the SEC. Actual results may differ materially from the expectations reflected in these forward-looking statements.

With that I'll turn the call over to Svein Moxnes Harfjeld, our Chief Executive Officer.

Good morning. Thank you, Eric. We enjoyed steady operations during the quarter, with an EBITDA coming in at $13.1 million, with a net income of $4.2 million equivalent to earnings per share of $0.07.

We will pay a dividend of $0.03 per share for the quarter. The dividend is payable on February 15 for shareholders of record as of February 7.

Cash at the quarter end was $42.6 million of the total debt repayments of $19.2 million during the quarter. And we are in compliance with our loan covenants at the end of the quarter. We prepaid $80 million on our credit facility with Royal Bank of Scotland during the fourth quarter and will prepay an additional $12 million during the first quarter of 2012, to stay in compliance with the loan-to-value covenants.

Following these prepayments, the next scheduled installment under this credit facility will be in the third quarter of 2014, i.e. 2.5 years from now. Consequently, the only installments in the company up to that point in time are for the DST Eagle and DST Phoenix, which combined comes in at just below $5 million per year.

We agreed to amend the time charter of the DHT Eagle with Frontline, whereby monthly Charter hire shall be $26,000 per day for the remaining period of the charter commencing January this year. The difference between the original charter and the amended charter hire being $6500 per day shall be paid in arrears with one lump-sum payment due in December 2012 and the second lump-sum payment due at the end of the charter period, expected to be in April/May 2013.

Following this amendment, phenomenal revenue and charter period remains unchanged. We have received notices from our charter that three vessels will be redelivered. We will have DHT Regal expected redelivered in March 2012 and she will then enter the Tankers International Pool. She will, upon redelivery, also go through a drydock and, third, special survey.

Further, the Aframaxes -- built in '94, Overseas Ania and Overseas Rebecca, are expected to be delivered during the same month, i.e. March. And the company is currently considering various alternatives from employment to also potential disposal of these two ships.

The contract cover for the company in 2012 is 70%, with contracted revenues alone exceeding the budgeted cash costs of the company. And this includes debt installments for the year. And with that we open up for Q&A.

(Operator Instructions). Natasha Boyden, Cantor Fitzgerald.

Thank you, operator; good morning, gentlemen.

I wanted to -- can you talk a little bit about why you have decided to put the Regal into the Tankers International Pool? Is this a way for you to gain exposure to the spot market, or is it just a temporary development as you look to secure a charter for that vessel?

I think in general, currently, there is very limited liquidity in the time charter markets. So although we see brokers' estimates of what could be done on time charters, it is a bit over a theory in this. And we -- you know are already members in the TI Pool, and are pleased with the Pool's operations, and as such it's natural and easy for us to redeploy the ship in the Pool.

Is that a permanent development or would you take that out if you did see a reasonable charter that you established the rights of?

In general, we are open to time charters. So if we could develop charters that we deem to be attractive for the shareholders, then we will consider that. But we are not so keen to limit the upside also in the fleet by fixing our ships at fixed charters at very low rates. So we are mindful of that.

Sure, understood. Okay, thank you. Now when you say some of your options are to dispose of the Ania and the Rebecca, do you mean either scrap or sale, or both potentially?

It's selling that we are pursuing. That could be either for continuous trade with a new buyer, or it could also include the demolition. So we are currently exploring the markets, and will hopefully determine that over the next four to six weeks what will be the outcome. But we are open to both.

And given the redelivery of the Regal and obviously the potential disposal of the Ania and the Rebecca, a couple of questions driving off that. First of all, do you see asset values attractive where they are? And would you seek to replace the Ania and Rebecca if you did dispose of them? And secondly off that sort of question, how safe do you consider your current dividend level?

To answer the first question, we are not planning to replace the Ania and Rebecca immediately. So the company in general will look at opportunities for growth that there will find to be prudent and attractive to shareholders. But there's no particular plan to replace those two ships.

As to the dividend, the company's policy really is to evaluate this on a quarter by quarter basis, and the board is deciding on this. And this is really a reflection of the profitability and the cash position in the company for the fourth quarter.

Okay. And then just lastly, I know you've obviously been fairly focused on preparing your debt so that you stay in compliance with your loan covenants, but would you guys consider a share repurchase program at the current level? The stock has fallen considerably in the last few months and it looks to be below NAV at this point.

There is no share buybacks being considered by the company. In general, the company would rather focus on the cash dividends rather than share buyback programs. And that's on a general note.

I think what's important to note now with the prepayments we have made both in the third quarter last year and mostly till now is that the runway of the company through these prepayments ensures that the cash break-even levels in the company remains very healthy and robust. And this we believe will create a very strong platform for the company to operate through a challenging and volatile market.

Okay, great. Well, thank you very much for your time.

(Operator Instructions). Ken Hoexter, Merrill Lynch.

Thanks, it's Scott Weber in for Ken. Good morning, guys. You plan -- you mentioned in the release you plan to prepay an additional $12 million during the first quarter here. I assume that's based on current market values. Is that prepayment likely to increase if asset values were to fall further?

This prepayment is a result of the valuations that we conducted at the quarter end, i.e. the end of fourth quarter. So, and that valuation resulted in a combined $30 million prepayment.

As it is our subsidiary, DHT Maritime, that is the borrower in this loan facility, that company has approximately $18 million of available cash at the quarter end, and that was used then to prepay. And then the subsequent $12 million to be prepaid during the first quarter is essentially cash from operations being generated in DHT Maritime.

As you might recall, there is a dividends restriction in that loan facility, which is for the subsidiary DHT Maritime, i.e. not DHT Holdings, that is the vehicle. And we wanted to avoid the additional funding to Maritime as such.

Okay, understood. When -- I guess when we look back at the front line renegotiation for one of the charters, just raises the question if OSG has approached you at all to renegotiate; any of the longer-standing charters you have with them? Do you expect that at all, or have they given you any indication looking forward, outside of the three they've said they plan on returning to you?

We have not received any formal request to renegotiate with these charters.

Okay. And then lastly, just given where the market is today and your exposure across VLCC's, Aframaxes and Suezmaxes, does any particular vessel class look especially attractive to you now moving forward when you think about the recovery and growth?

We are committed really to the crude segment and all three asset classes. I think it's fair to say that over the last 6 to 9 months, VLCCs have had a tougher beating on values compared to the two other classes. There's been very few transactions in the Suezmax sector. And for us it's really a little bit of a two-tier market with the older ships in the '90s and ships built over the last 10 years. But in general we are looking for growth going forward that will be valuable to our shareholders, be it charter-free tonnage or vessels that we can develop employment contracts for, i.e. fixed income.

Okay, terrific. Thanks for your time.

(Operator Instructions). Jeffrey Rudner, UBS.

Good morning or I guess good afternoon, gentlemen. Getting back to the covenant restrictions or possible restrictions and the repayment of the $12 million which will be repaid in the first quarter this year and the $19 million paid in the fourth quarter of last year, do you anticipate a firming up of asset valuations going forward? Obviously, we're paying less in the first quarter, which would indicate that maybe asset valuations haven't decreased as much. But what do you see for the rest of 2012, as best you can share with us as far as asset valuation goes?

The $12 million prepayment that is scheduled for the first quarter is not a reflection of asset values having changed; it's rather the portion of the $30 million that was a result of the valuations at the end of fourth quarter. So i.e., it's $18 million plus $12 million comes $30 million.

We have seen recently somewhat uptick in the VLCC segment values, and the Baltic weekly assessment has gone up now two weeks in a row by a combined approximately $2 million I think for a five-year-old. So there is -- there seems to be some resistance on that.

So -- but there is still risk, and we would still expect some volatility on values going forward. And that is really the biggest challenge in the tanker market right now is the volatility on asset prices.

Based on current asset valuations now, would you anticipate having to make an additional payment in the second quarter of 2012 to remain in covenant restrictions -- you know covenant facility?

We will typically be requested by the lender to obtain valuations towards the end of the quarter, and so that will largely depend on what the asset prices or values will be at the end of the first quarter. So it's hard to predict that.

That being said, the earnings in the tanker market currently has had a nice uptick, and the VLCC's earnings well into the 30,000s; Aframax and the Suezmaxes also generating quite reasonable returns, so those earnings should of course result in value staying relatively flat. But again, as we stated, the biggest risk in general in the market right now is volatility in asset prices.

Okay, thank you very much.

Just to add to that, the changes in value since this last appraisal we got in the end of December, we don't see any signs of any further weakening in asset values.

Terrific. Thank you very much, gentlemen.

(Operator Instructions). Michael Chapman, Private Capital Management.

Thanks for taking my question. What is the dollar value of debt assigned to Rebecca and Ania in the RBS line?

We are not communicating that. So those ships are part of a nine-ship lending facility with the Royal Bank of Scotland. And there has not been a breakdown communicated to the market. But we (inaudible) that proceeds from a potential sale will in its entirety go to repay debt.

Okay, so the either sale or scrap value exceeds the debt value that would be assigned to those.

We are not saying that. We are saying that we expect to use the proceeds from a sale to repay debt in its entirety.

Okay, thank you. And then what was the average earnings per day in the TI Pool in the fourth quarter?

The standard vessel in the Pool earned approximately $11,200 during the fourth quarter. That's 100-point vessel. So that's the average earnings in the Pool.

Okay. And on the payment in the first quarter of $12 million, will that just be dependent upon when $12 million accrues to the DHT sub? Or is it scheduled for early in the quarter, middle of the quarter, or it's just dependent upon when the cash becomes available?

We have already made a $4 million payment, which we did now in January, and we expect either to make loan payment of $8 million, or 2 times $4 million in February/March. So it's really from the cash being generated in that subsidiary.

Okay, great. Thank you, guys.

As we have no further questions at this time, I would like to turn the call back to Mr. Uboe for any other remarks he may wish to make.

Well it remains to thank everyone for participating on this call and being interested in our company, and that's highly appreciated. Thank you very much, have a good day.

That concludes our conference call for today, ladies and gentlemen. Thank you for your participation. You may disconnect your lines.