DHT Holdings Inc (DHT) 2016 Q1 法說會逐字稿

Thank you. 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 at our website at dhtankers.com through May 10, 2016. In addition, our earnings press release will be available on our website and on the SEC's 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, including DHT's prospects, dividends, share repurchases and debt repayment; the outlook for the tanker market in general; daily charter hire rates and vessel utilization; forecast of world economic activity; oil prices and oil trading tariffs; anticipated levels of newbuilding and scrapping; and projected drydock schedules.

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's EDGAR system, including the risk factors in these reports, for more information regarding risk factors that we face.

I'm joined today by DHT's co-CEOs, Svein Moxnes Harfjeld and Trygve Munthe.

And, with that, I will turn the call over to Svein.

Thank you, Eirik. Good morning and good afternoon, and thank you for joining the DHT first-quarter 2016 earnings call. We will, during the call, go through our operational highlights, financial highlights, capital allocation, fixed income, and cash breakeven, as well as some tanker market and equity market thoughts.

First on to the first -- and then on to the highlights. We took delivery of two VLCC newbuildings, the second and third in a series of six ships. The DHT Leopard was delivered in January, and the DHT Lion the water in March. Following the sale of our Suezmax DHT Trader in December, we have agreed to sell the 2001-built Suezmax DHT Target for $22.5 million. The price is in line with current comparable transactions. We expect to deliver her to her new owners later this month.

In our continued effort to use these rewarding times to further strengthen our balance sheet we prepaid $46.9 million of bank debt. And Q1 was the first quarter for our securities repurchase program, during which we employed $5 million.

And then on to our spot earnings. 2016 is off to a great start, with our spot earnings for the first quarter coming in at $62,600 per day. Our spot earnings over the past five quarters have been remarkably steady at about $60,000 day. Our spot earnings represent an excellent performance and compares favorably with the competition. The combination or of our quality fleets or ships, and great efforts for our commercial team, serve us well.

Following a great first quarter, we have to date booked 71% of our spot sales for the second quarter at $59,000 per day. As such, about 43% of our spot calendar year is spoken for, at more than $60,000 a day. And these we think are handsome numbers.

We will now go through the income statements. With TCE revenues at $90 million; normalized EBITDA at some $70 million; and net income, excluding impairment of $40 million, it was a solid quarter. EPS was $0.34. This, however, includes the impairment of the assets held for sale equaling $0.09 per share. As such, the normalized EPS was $0.43.

When determining the dividend for the quarter, we have considered a normalized EPS, i.e., adjusted for impairment, and will, as such, a pay cash dividend of $0.25 per share on May 25 to shareholders of record as of May 16.

And then over to Trygve.

Thank you, Svein. We'll take you through the balance sheet. At this point, our balance sheet is pretty straightforward. It should be noted that of the cash balance it should be noted that of the cash balance of $77.5 million, $9.7 million is earmarked for the last and final pre-delivery installment to Hyundai Heavy Industries. This installment was, by the way, paid in the month of April.

As far as leverage, you will note that interest-bearing debt to total assets stands at 46%. If you adjust for the sale of the DHT Target and the delivery of the three remaining newbuildings, that figure moves to 50.1% pro forma.

Next we would like to point out the main cash flow items for the quarter. We generated $58.9 million of cash in the quarter. During the quarter we paid two additional pre-delivery installments to Hyundai, totaling $18.5 million. Ordinary debt amortization amounted to $6.9 million for the quarter. Dividends for the fourth quarter of last year was paid in the first quarter this year, with $19.7 million. And as previously communicated, we continued our deleveraging campaign in the quarter, a total of $46.9 million was voluntarily prepaid to banks.

And during the quarter we repurchased $3 million worth of convertible bonds and $2 million worth of common stock. If we expand the horizon a little bit, you will see that during 2015, we paid $49 million in dividends, $33 million in ordinary debt repayments, and $58 million in voluntary debt pre-payments.

Since we started with the deleveraging campaign in the second quarter last year, we have prepaid total of $105 million of mortgage debt. And interest-bearing debt currently stands at about $654 million, so the prepayment equates to some 16% of that amount. Over the same period, we have paid $64 million in dividends, and spent $5 million under our securities repurchase program.

You will recognize that this balanced approach between strengthening the balance sheet and returning capital to shareholders is in line with our core strategy of managing the cycle.

Thank you, Trygve. Then on to fixed income, you will see that for 2016 we have some 38% of our capacity fixed at just north of $100 million. Earnings in our term charter book have increased as we have extended time charter contracts at higher rates. Our VLCC time charter book now stands at an average rate of $44,800 a day, a number being higher than the 20-year average spot market.

It is worth noting that the liquidity in the time charter market is [volatile]. We are continuing our endeavors to build additional fixed income, but want to see rates in reasonable territories.

Then, onto cash breakeven. As you heard us say many times, cash breakeven gets a keen focus from us. On the following two slides, will illustrate our current breakeven levels and cash generation potential. The left stacked bar represents the expected cash costs for the year. This includes all cash costs: OpEx, debt service, G&A, and maintenance CapEx. We have left the market-related debt repayment components in the Argus loan out of the calculation, as it is not relevant at rate levels around the cash breakeven.

The cash cost for 2016 combined is estimated to be $163 million. In order to generate revenue equaling this cash cost, we need our VLCCs to earn $22,800 a day; and our Aframaxes, $11,200 a day. We do, as mentioned, however have 38% of capacity fixed out, and generating $103 million of revenue. Adjusting for this, our spot VLCCs only need to earn some $13,700 a day for the Company to be cash neutral, a level we consider to be very comfortable.

The far-right second bar illustrates the cash-generating capacity of the Company in three different scenarios: at $60,000 day, similar to that of last year; but $42,500 a day, equaling the 20-year historic average; and $30,000 a day, by some considered a modest market. As you can see, if 2016 comes in at 2015 levels, we should generate more than $300 million in cash. If level gets in at the 20-year historic average we should generate over $125 million. And in that $30,000 a day market, we should generate some $70 million in cash. Keep in mind that we have fixed about 43% of our spot capacity for 2016 at rates of more than $60,000 a day.

On the next slide, we have applied the same thinking to 2017. Estimated cash flows is $176 million. We considered -- when considering the fixed income we have, our spot VLCC is requires $20,700 a day. With similar scenarios as in the previous slide, we should generate $254 million in a $60,000-a-day market; $144 million with a 20-year historic leverage; and $65 million in a $30,000 a day scenario. We think these robust cash breakeven levels bode well for DHT.

And then back to Trygve.

Before we open up for your questions, we would like to take you through four slides shedding some light on short-term spot market volatility, share prices, quarterly spot earnings achieved, and finally earnings per share.

As we all know, the spot market for VLCCs is both seasonal and short-term volatile. Over the past five quarters, we have seen highs of over $100,000 per day, and those of about $20,000 a day. And partly thanks to Tanker International's green arrows/red arrows app, everybody now has real information -- real-time information on the VLCC spot market, and seeing the trade tanker equities accordingly.

This slide here shows a pretty strong correlation between daily spot market movements and the DHT share price. However, the volatility of the share price is not merited by the actual quarterly spot earnings achieved. These earnings have been remarkably steady of the past five quarters. Yet the share price has been trading in a wide range, with the highest above $9 and lows of about $5. We are not sure what to make of this. But the short-term focus or edginess of the investor community seems rather prevalent.

And just to round it off, we'll show you share price development versus earnings per share. It is puzzling to see share price and earnings moving in such opposite directions now for three quarters in a row.

And with that a little brief out of the way, we are ready to provide our answers to your questions.

Operator, back to you.

(Operator Instructions). Spiro Dounis, UBS.

Just wanted to maybe start off with the dividend. And it kind of relates to that last point you made, Trygve, about on maybe seasonality. I guess 2Q 2016 might be the first quarter we see a decline in the dividend since you announced the 60% policy. Maybe, like I said, because of seasonality and rates sort of coming in a bit. So I guess I'm just wondering if this might be a quarter where you sort of flex that 60% higher just to maintain some level of stability in the dividend, or do you think you'll even be rewarded for it?

I think it's premature to discuss what we are going to pay for the second quarter. So I think we should leave it with the guidance that we have of minimum 60%. And it's really up to the Board to have this -- the final word on what's actually going to be paid.

Okay. Fair enough. So the second question, just on the S&P market. I guess for most of 2015 we heard that there's a wide bid/ask spread between buyers and sellers, and that obviously was sort of keeping prices stale, to some degree. And I guess lately we've seen you on the selling side, some others recently on the buying side. And I guess I'm just wondering, is it your view that that wide spread has sort of come in now? And has the market now found a clearing price for vessels?

I guess every time you have a transaction, the spread has to come in, so to say. But there is a -- some price movement, if you like, from the last Suezmax sale that we did in December, and to what is the market today. There's still a little activity, I think it's fair to say. On the Aframax front, there are a fairly wide number of ships available to buy. And these ships are also owned in a very fragmented structure. So there's all sorts of potential sellers.

But it seems that the private community that has these type of ships -- and also typically are in dry cargo -- seems now to be willing to more focus on very low asset prices on dry cargo and kind of disregard earnings, as to Trygve's point earlier, and buy ships in the tanker sector where earnings are.

I think on the VLCC front, the ships in general are owned on stronger hands. And the people are not so keen to sell unless they get the meaningful monies. And still although the second quarter is has come off the height of the winter, earnings are still fairly handsome. And especially considering some of the guys with older ships and hardly any debt, they still make good cash flows. But we don't expect a big flurry of transactions, frankly, as in general the industry seems to be a bit short on capital.

And then maybe just sort of following up on that, I realize you are not sort of growing the fleet necessarily beyond the three deliveries you have got coming. But if you were to go out and decide you want to grow the fleet again here today, just wondering, is it -- obviously, newbuild prices are really attractive. Is it a newbuild order you think you'd place? Would you buy something coming out of the yard? Or would you take a look at maybe a five-year-old vessel?

I think we can say for once we would not contract renew additional ships at this point. But resales or more than secondhand could be done, of course.

Great. Appreciate the color. Thanks, guys.

Fotis Giannakoulis, Morgan Stanley.

Congratulations on a good quarter. I think, Trygve, you mentioned that the chartering market is pretty thin, and you are not willing to charter your vessels below a certain level. Can you please become a little bit more specific, and try to give your explanation why there are so few period charters?

Liquidity in general has been rather thin. And there was some flurry of fixtures done towards the end of the first quarter, mostly by traders and one large oil company that tend to act maybe more like a trader. But most of those deals failed for whatever reason. And those were done on the fly, with an expectation in contango -- it's hard to say.

But our largest customers are oil companies that tend to have a portion of the requirement covered by term charters. And we have, as you know, several ships on to them. These charters might not be very long charters. They could be 1 to 3 years, although we have a seven-year charter. But they tend to roll on and be extended because they want a continuation of the services that we provide.

So, but today, I think you see very little appetite, even though if you were willing to adjust your numbers I think you see little appetite in this. And I think a reflection of this might be that freight is not really expensive, either. It costs from say, $1.50 to $3.00 a barrel. So many refiners, end users, are probably quite comfortable with having some spot exposure as well.

And so the VLCC market is at large really a spot market. Although DHT as a company has managed for this year to have close to 40% of fixed income and providing the visibility on earnings.

Can you clarify? Is there a level that you would be willing to charter? Or is that just a matter of availability, where there are no charters that they are long enough to worth taking the commitment?

We are not negotiating this on the earnings call. (laughter)

Okay. Thank you. I want to ask you if you have seen any changes in the trade the last few weeks. Obviously the chartering market has been soft in the last couple of weeks. But how much of this softening is just a regular volatility that we often see in this market? And even in highly profitable rate environment, we have seen this kind of dip before. And then how much is related to the increase in oil prices? And in general, how do you think that this increase in oil prices from previous quarter has affected the trade?

As we tried to shed some light on in the presentation, we think that this is the nature of the market that we are in; that it is short-term volatile, and it has pretty big swings. And of course, recently, we have seen spot rates ease off. Now there are some signs that it's coming back. And as Svein said, quarter to date, we have covered some 71% at rates pretty much in line with what we did in the previous quarter. So we just think this is the nature of the tanker markets, that it is big swings in the short term. But on a quarterly basis, it tends to average out in a much more stable fashion.

Thank you. And we saw last week the charter fixtures; they started increasing, especially in the Middle East, it was a pretty good week and then some number of fixtures. But on the other hand, rates went on the opposite direction. Do you think that this is just a lagging effect and the impact of the earlier weakness in chartering activity in April? And how do you view this week in the chartering activity both in the Middle East and in West Africa? Have you seen any changes, and any changes in the flows primarily?

Despite the efforts of the TI app in trying to create transparency, there's still a fair number of fixtures on cargoes that are under the surface. Keep in mind, some of the big end users -- they have a term charter book of ships that they have scheduled in their own programs. You don't get to see those on the fixture list. Sometimes their own ships can't match their own cargo, and they do a re-lift and so forth.

So I think overall when you look back at the number of cargoes moving out of the Middle East, it's also very steady. But the fixtures reported in the market might vary a bit, because ships are drawn by own fleets from time to time or are under contracts. So we don't really see any big changes in the volume. But I think it's fair to say that the volume of cargo so far this year is not really dramatically changed on the demand side from last year. But last year, of course, you had lots of supply moving into storage. And this might be easing off a bit this year, i.e., we are more shipping to meet demand than to just also build an entry.

One last question. I remember last time that you were in New York, you were talking about something like 1.5 or two years more tanker cycle. Can you give us your outlook and your view at which point of the cycle we are, and how the company is adjusting its investment strategy and its capital allocation strategy to this outlook? And to that, I saw you sold one of your older -- your oldest vessels. You still have three more vessels built in 2001, and one in 1999. Are these vessels for sale, as well?

I think to your first part of the question, Fotis, we, like most other people, recognize that there is an acceleration in the deliveries of newbuilds towards the end of the quarter, or end of the year. And we wouldn't be surprised if the fleet side grows somewhat faster than the demand for transportation does, towards the end of the year. So everything else being equal, that suggests that you should have a somewhat softer freight market at that point than what we have enjoyed so far, year-to-date.

But I think the key areas to keep things in perspective that we have been enjoying very healthy rates. And as a matter of fact, if you analyze our quarterly earnings per share, we are trading at 3, 3.4 times earnings. So there is definitely tolerance for somewhat weaker earnings towards the end of the year without having a massive selloff in shares, I would like to believe.

In terms of --.

In relation to the older ships?

In terms of older ships, the Target was the lone Suezmax in our fleet after we sold the Trader at the very end of the fourth quarter. It was, in that context, rational to do what we did. But, it is not -- it doesn't mean that we are there to keep on selling older units, at this point.

And keep in mind, some of our older units are also debt-free. And even at the $30,000 a day spot market, the cash flow is over $20,000 a day on these ships. Our oldest lady, built in 1999, she is on the time charter at $45,000 a day until well into next year. So, we don't see any reason for kind of exiting those assets at this point.

Thank you, gentlemen. Appreciate your time.

Herman Hildan, Clarksons Platou.

My first question is -- I mean, in the historical context it's quite unique, as we've discussed before, to have stronger rates and lower asset prices. And what I'm wondering is -- as we've gone through today you've been quite aggressive on deleveraging our balance sheet, and making sure that you are in good shape, even with lower rates.

The question is, at what stage -- what would be required for you to materially change your strategy? Or will you just stick to your current, call it, strategy regardless of what happens with the market and your share price [elation]?

Certainly, we understand your question in changing the strategy. I think we have tried to communicate to the market that we do different things at different times in the cycle. And I think, to date, our track record suggests that we have done different things at different times in the cycle. So, there is no really change in this. This we think is well defined strategy and we intend to execute on it.

Of course, the most challenging aspect, of course, is to know when to buy, when to sell, and these things. And right now, I think DHT is just maximizing its portfolio. It's earning as much money as it can. It's continuing to strengthen the balance sheet. At some point, there will be growth opportunities again, but we don't think they are imminent.

I was thinking more about the opening up to the possibility of being more aggressive on the buyback, rather than paying dividends.

We have a buyback program, or a securities repurchasing program. And we will update the market on a quarterly basis on how we get on with that. But we have a set of things we want to do, and there will be a mix of these things on a continual basis.

Thank you. And, finally, when the Aframax, the term charters expire in 2017, it's the kind of long-term aim to become a pure play VLCC company? Or are you still pragmatic in terms of different segments of the crude tanker markets?

It's more the latter, Herman -- that we have said all along that we think of ourselves as large crude carrier company. We have had presence in Afras, Suezes, and these. And a bit of faith, we ended up with over-emphasized -- or the majority of the money invested in VLCCs. We are nothing against Suezmaxes, and neither with Aframaxes. There's no strategic choice of becoming a pure VLCC player. It's not.

Okay, thank you very much.

Mark Suarez, McQuilling Holdings.

I just want to go back to a comment you said about the -- normally the volatility of TCs, but also how thin it is in terms of fixtures. And I'm wondering, if that market were to come around, do you guys have a potential target in mind, in terms of a spot vis-a-vis TC, if you will, from an employment mix perspective? As you move through the market -- and of course we expect to see net fleet growth sort of accelerate in the latter half of this year -- do you have sort of a target in terms of number of vessels within the VLCC fleet, if you will, but you are willing to go into TC?

The answer is no. We don't have a specific target on it. But with that said, we would be happy to add some to the 2017 time charter book, as you saw from the presentation. It is meaningfully less time charter coverage for 2017 than for 2016. But we do recognize, as we said earlier, that the large tanker market is first and foremost a spot market. So if your desire is really to put everything else on time charter, then you should probably be in a different segment of the shipping markets.

And number two, I think over time a spot market tends to return more on average than what time charter does. But of course there are times when the market is totally falling to pieces, and then time charter coverage is meaningful. So we run DHT in a way to make sure that we can survive the unforeseen negative. Yet we are not afraid of having plenty of participation on the upside by keeping a good chunk, if not the majority, of the fleet in the spot market.

Okay, fair enough. And then to go back on your comments in asset values, we have seen secondhand asset values, especially the five-year-olds, actually accelerate since last year. Year-over-year prices have actually come down. And I know you mentioned that you are willing to explore both opportunities as growth beyond your newbuilding program. But I'm wondering if you have seen renewed interest in the newbuild resale market. Have you seen attractive opportunities, and if you can compare that to any secondhand opportunities you have seen so far this quarter?

I think, firstly, I should make a distinction between a newbuilding contract and a resale. A newbuilding contract is typically a ship that gets delivered, say, two years out; whereas a resale is a ship that's coming straight out of the yard but with prompt delivery. And the pricing will somewhat be reflective of what current markets will give you, and of course what expectations are.

We think that a resale today, you see EBITDA is probably between the very high 80s and the low 90s for prompt delivery. If you go to Korea today, you probably can break 90 on [2018] deliveries -- say high 80s -- 88, 99 -- although nothing has been done. You have seen some activity at somewhat less-regarded shipyards in China being able to go much lower on price, but maybe also smaller levels of installments so it's more like an option.

So, but a five-year-old we haven't seen really any deals since [Cibari] bought the five ships that they did over the second half of last year. So, I think the best we have today is broker estimates.

Okay. Fair enough. Thanks for the details, guys. Thanks for your time, as always.

Noah Parquette, JPMorgan.

Most of my things have been answered. I just want to ask about special operating expense. It was pretty low this quarter, especially considering big deliveries of two ships. Are there any typically one-time fees when you take deliveries of ships, or higher costs? And you give some guidance on a going-forward basis what special OpEx would be?

I think OpEx for the quarter was very good. There are some details into that. Some ships were on long voyages, and you get periodical changes in when you provide supplies to those ships. But as for the newbuilds, the supervision costs for looking after the construction period after delivery, we capitalized those. But then the OpEx at the get-go of newbuilds are much lower than the average remaining fleets that we have. Because in the beginning, there are not really spares or much maintenance to be done. So the OpEx at the beginning is very, very good.

And this is kind of a bit of the beauty that is six new ships that we have. They have superior fuel economy. So the top line is meaningfully higher than the average, general VLCC fleet. In the OpEx is meaningfully lower than the general, average VLCC fleet. So the Company and the shareholders really stand to benefit from much better earnings of these modern units.

Okay. And just moving on to the market, every time we seem to see a spike in VLCC rates, we see also more congestion in China. Can you talk a little bit about what you think the cause of that is, the root cause, how structural it is, and how we can think about that going forward?

I think imports to China, as we all know, has been increasing over many, many years. But, it could well be that infrastructure investments have kind of been lagging imports of oil, and then you create bottlenecks. What has been a more recent phenomenon is in certain ports where some of the teapot refineries are bringing in their oil are not really rigged up with sufficient shore-based storage, and require distribution more directly into these refineries. And that is just creating delays. So I think ports, in general, in China, really do need more investments to be able to take it through the continued increase in the imports in oil.

Now with also domestic production in China inching down, in order to maintain at the minimum the refining turnarounds of production in China, the imports will still increase. So it doesn't seem that delays in support in China is the phenomenon that will end anytime soon.

Then, lastly, I just want to ask, have you seen the contango in Brent come down significantly? It's almost flat. How much (technical difficulty) you estimate is out there? And is there a chance to see some of that sold off, now that we've seen the contango (technical difficulty)?

Could you repeat that, Noah?

Yes, I just was asking the contango has come down so much, how much floating storage do you estimate is out there? And do you see that as risk of being sold, and those ships coming back to trading?

For the VLCCs, we don't frankly see much floating storage in the way that ships have loaded and dropped anchor, and are waiting to deliver the cargo at a later point. There's certainly a congestion in the discharge ports in China, and to some extent in the low port in Iraq. But that's not sort of commercial storage. That's just tightness in the supply chain. So we don't really see a big overhang from the large ships for dwindling contango.

Okay. That's all I had. Thanks again.

(Operator Instructions). Amit Mehrotra, Deutsche Bank.

So I had a question on the demand side of the equation, with 1.2 million barrels per day of sort of what everyone is talking about, from a demand growth standpoint this year. But just wondering if you could offer some thoughts on how that overall demand growth will translate to seaborne demand? And then actually more importantly, sort of how that is also divided up between the different vessel classes, so we can get a sense of how prospective supply growth may be absorbed. I don't know if you've thought about that or have some views [to ensure] that growth. Thanks.

You know, quite frankly, we think important -- oil demand is of course important for the whole equation. We think actually for the last year or more that the key has really been oil production. Because we have been transporting not only for consumption, but also for storage. So, I think it's more important to look at how the global oil production is going to develop in 2016 compared to 2015.

And on the -- sort of on the aggregate basis, it's not much increase to speak of, but there are some important shifts so that the non-OPEC, first and foremost, North America, is coming down. And then Iran and certain other players are coming up. The so the net-net may not be very significant. But the change in the composition of the total is important. Because when the US produces less domestically, and they keep inventories at the same, then of course they need to import more. But -- and then Iran and others are there to make up the shortfall of non-OPEC.

So we think the rotation is positive for tanker demand, and it is more important than whether the total global oil consumption is going to go up by 1.2 or 1.1 or 1.3.

And then to your part of the question on what asset classes -- we think, as we've said many times, that these are, first and foremost, long-haul ships. So the majority of the crude coming into the United States would be on large ships. And the majority of crude going into the growing regions in the Far East is also on large ships, so we think the bias is in the large ships' favor.

Great. But last year, if you look at total seaport demand last year, 50% were put on the -- I guess 30% Aframaxes, 20% Suezmaxes. Do you think that sort of proportion will hold? Or do you think it will skew more towards the fees this year in terms of incremental demand?

I think it's more transport economics that decide what cargo goes on what ship. In order for a Suezmax to pick up a cargo, say, from the Atlantic to China, it needs to be in a much lower market, relatively speaking, to the VLCC to compare or to compete on the per-barrel cost basis. If I'm not wrong, the historic numbers are such that Suezmaxes have earned some 80%, 83% of VLCCs. And Aframax is some 60% of VLCCs. So, if you deviate largely from that relative number, then you will always have a substitution effect, both up and down, between the different asset classes.

But it's not a trend that tends to last for long. It's that traders or end users look to maybe take the opportunity to use a bigger or smaller ship occasionally. But over time, they tend to be fairly representative. So also there's a bit of a hassle, of course, on the long-haul to have, say, two, three, four small ships as opposed to one big ship. So there is some nuisance in that as well. They just want simple, straightforward, reliable logistics. And that's giving them the best economics.

Right. That makes sense. Thanks. One follow-up from me, and this is just again on the demand side. How do you think about the -- I guess the near-record stockpiles of oil all around the world, and maybe even ex-China all around the world. And how does that play into your assessment of the market over the next 12 months or so?

And then just piggybacking on Noah's question a little bit on the contango, or even if sometimes backwardation -- can that accelerate drawdowns of inventory and whether you think of that as a risk. Or do you think that sort of is not going to happen over the next 12 months? Can just give us your view there?

We think it's difficult to pinpoint when it's going to happen. But we think that after such a long period of stock build that we've been through, there will be a point when there is going to be a stock draw. And as we have said all along, when that happens, we think it's a soft patch or an air pocket for the tanker market. It's not causing a major shift in the overall cycle, if that makes sense.

Okay. That makes sense. Then just one last one on asset values for me. We seen obviously some moderation year-to-date but there seems to be, given the price decline, some more bidders in the market, I would say anecdotally at least. So it looks like maybe the bid offer spread is tightening. And maybe that brings more buyers or bidders to the market, which actually could drive asset values to recover little bit. Is that your view? Do you think we've seen -- reached the bottom in terms of the sell down on asset values year-to-date? Or maybe what's your prospective outlook over the next 6 and 12 months?

I think it's hard to say exactly. But as you rightly point out, you have seen some transactions clear. And of course this means that the bid-ask has closed in. So when we sold our Suezmax [now] there were a handful of interested parties, but the price expectations of only one kind of net what we wanted. But I think people are trying. The earnings are still healthy. And especially in the lower end, people are looking at the delta probably between the 15-year-old and scrap value.

I think if you look -- you remember back to say two, 2.5 years, you had to 15-year-old Vs selling at, say, mid-20s. And scrap value was at 18, 19, even 20. So the perceived capital at risk was kind of low. Today now that I think a 15-year-old V market is probably in the mid-, high-30s. But scrap values have moved a bit down. So you have seen some of those kind of -- type of buyers that moved on older assets some two, three years ago. They are not really looking at it right now. They think the delta may be too big. That's why some of these Vs are now clearing. I would think so.

I think it's important to keep in mind that what we have witnessed in this cycle is unprecedented; that we have such a strong freight market, both spot and time charter, and we have vessel values not moving in tandem it all. And normally it would be the freight market that's leading the way. So, spot market goes, takes off; time charter market is coming after; and then asset values follow.

What we've witnessed over the past several months is that asset values are coming down, whilst the freight market is staying up, and at very healthy levels. So I don't think it's sort of a -- an indicator, a leading indicator. I think it's just more a reflection of the fact that there are quite a few, if not distressed, at least stressed sellers out there. And there frankly aren't that many buyers because of the capital constraints that are in this race going through, both equity and (multiple speakers).

I guess it just makes the ROA look that much better on a mark-to-market basis; so maybe a silver lining to it all. All right, guys, thank you so much for taking my questions. Appreciate it.

Thank you. There are no further questions in the queue.

Thank you very much to all for attending our earnings call, and we look forward to your continued support of DHT. Have a good day.