DHT Holdings Inc (DHT) 2014 Q2 法說會逐字稿

Thank you and good morning to everyone. Before we get started, I would 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, our Form 6-K evidencing 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, tanker market in general, expectations regarding daily charter hire rates and vessel utilization, forecasts of world economic activity, oil price and oil trading patterns, expectations regarding seasonal fluctuations in tanker demand, a disparate level of new building and scrapping, and projected dry-dock schedules, other risks and uncertainties more fully described in our filings we made with the SEC. Actual results may differ materially from the expectations (technical difficulty) in these forward-looking statements.

And, with that out of the way, I am here this morning joined by Svein Moxnes Harfjeld and Trygve Munthe, co-CEOs of DHT. And, with that, I will turn it over to Svein Harfjeld.

Thank you, Eirik. And good morning to all, and thank you for listening in on our earnings call. We will now go through the highlights of the quarter.

EBITDA for the quarter came in at $1.6 million with a net loss for the quarter of $8.1 million, equal to $0.12 per share. The operating expenses reflect an increase in the operating fleet by three VLCCs. Further, the expenses reflect startup costs and up-storing related to the delivery of DHT Condor, DHT Hawk, and DHT Falcon.

You should note that these three VLCCs came out of some stressed situations, hence their spare part inventory and general storage levels were below what is deemed to be adequate. The majority of this has been resolved and has been expensed in the quarter. Additionally, we had three VLCCs -- namely Ann, Chris, and Eagle -- undergoing immediate service during the quarter.

We will pay a dividend of $0.02 per common share for the quarter, payable on September 17, for shareholders of record as of September 9.

We acquired a 2004-built VLCC for $49 million which was delivered at the end of May. She has been renamed DHT Condor, and the acquisition was financed with cash on hand. She completed her second special survey and dry-dock in July.

During the quarter, we entered into firm commitments for the debt financing of four of our new buildings and the construction at Hyundai. The financing equals about 50% of the contract prices with an average margin above LIBOR of 2.5%. Assuming a LIBOR of 0.25%, the average total debt service, i.e. interest and installments per vessel per day, is estimated to about $11,100 in the first year of the drawdown.

The financing commitments are subject to final documentation. We view the debt market as favorable and we will pursue raising financing for the remaining two vessels in due course.

At quarter end, we had a fleet of seven VLCCs, two Suezmaxes, and two Aframaxes, totaling about 2.7 million deadweight tons in operation, and six VLCC new buildings totaling about 1.8 million deadweight tons under construction.

The purpose of this call is to discuss our second-quarter results. It is our policy to not comment on market speculation. With that, we will open up for a Q&A session. Moderator, please?

(Operator Instructions) Jon Chappell, Evercore.

My first question surrounds your current liquidity. Based on the cash on your balance sheet today, and any debt that you could draw down on some of the current assets and your new building commitments, what would you estimate your current liquidity to be if there were any opportunities in the secondhand markets today?

I think you should assume that with our current liquidity, we will not make any additional investments.

As we said before, John, essentially what is on the balance sheet today is earmarked for the pre-delivery installments on the new builds.

Right. Okay. So there is no kind of free cash on the balance sheet? Everything is stat as we stand today. All right.

And then, just one other question. You have kind of evolved a little bit from focusing on secondhand assets two years ago to more of an eco-focus with a lot of your VLCC new building orders over the last 12 months. As you look at -- as you compare and contrast the benefits of those two -- one, getting the assets on the water today versus two or three years down the road, versus, two, the fuel efficiencies of the newer ships -- how do those sit today as far as your priorities are concerned?

I think you hit on the key point that, of course, new builds, if you were to place additional orders at this point, the delivery is going to be a few years down the road. And market forecasting is always difficult. But, of course, the further out you go, the more difficult it is.

And, specifically, for us, a key assumption in our bullish outlook on the intermediate term is that we think the fleet is not going to grow measurably over the next couple, three years. But, after that, then, really, anything could happen. So I think that is one point.

Furthermore, as we have expressed before, we like to take our share of the responsibility for not over-building this market. So we feel that the ships that we have contracted for is a decent number given the size of DHT. And, of course, then, on the second hand, over the past year I think you will see in the secondhand values, appreciate some 30%, 35%. So of course, you could have made more compelling investments a year ago, but we think that even at today's levels, chances are that these are going to turn out to be good investments.

You still look at breakeven numbers and required rate numbers that are below historic averages, and we think it is important to remind oneself that a recovery is not back to historic averages. We think the recovery is back to peaks way above the averages. So we think there is significant upside to be had as well.

Okay. Understood. One last quick one. You mentioned the OPEX is a little bit higher because of the VLCCs that were bought from a distressed situation. Were all those expenses fully in the second quarter or is there any carryover into the third?

The majority was expensed in the second quarter. There will be some minor carryovers for the next few months, but those will not really have any big impact on our quarterly OpEx levels.

(Operator Instructions) Mark Suarez, Euro-Pacific Capital.

If we can just go back to the most three recent acquisitions from the VLCC side, are you still focusing on that segment? Or -- and are you starting to see maybe some more sales candidates coming to the market that sort of meet your expectations from a pricing standpoint?

I think we have a focus on all the three asset classes that we are in -- Aframaxes, Suezmaxes, and VLCCs. But, switching back a year, we felt that VLCCs had the most compelling and were the most compelling investments we could make. We have been trying to pursue opportunities in the Suezmax space, but there is far less liquidity in the market for secular vessels than it has been on VLCCs, hence we have not really been able to identify opportunities that we wanted to execute on.

On the asset side, we have spent less time on the two bigger classes, we would say, but we certainly are not ruling out that at all. So -- but again, we are in these three classes and we intend to stay in those for the time being.

Got you. And if you were to pursue that route, let's say, if you were to find good candidates in the Suezmax space, will you have to go back into the market and maybe do another capital raise for additional secondhand acquisitions?

I think as was alluded to in the previous question, our current balance sheet, we do not think it provides for any additional acquisitions without more risk capital.

Got you. Okay. That's helpful. And, then, finally, you talked about not being hesitant in maybe picking up or going after new new builds, as you want to be responsible in sort of an industry not to over contract more vessels. But have you seen any recent opportunities as to maybe taking over existing new build contracts, or maybe vessels that could be delivered over the next 12 to 18 months, if you will?

There has certainly been some talk about that. And, as you see in Scorpio for one disposed of some contracts to another new work outfit. And, of course, this is different from our perspective, because these are orders already placed and these ships are going to be built and delivered. So that has some more appeal to us than to add to the order book by signing up for new ones.

And have you found any attractive contracts out there -- prices that seem reasonable to you or that meet your targets?

No. I think it is fair to say that the holders of these contracts will seem to aim for higher prices than what you can obtain today.

(Operator Instructions) There are no further questions in the phone queue at this time.

All right. Then, we would just like to say thank you to everybody for your continued interest in DHT. Have a good day.