DHT Holdings Inc (DHT) 2018 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Quarter 1 2018 DHT Holdings Earnings 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. 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, dhtankers.com, through May 14, 2018. 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 markets in general; daily charter hire rates and vessel utilization; forecast of world economic activity; oil prices and oil trading patterns; anticipated levels of newbuilding and scrapping; and projected dry-dock schedules. Actual results may differ materially from our -- 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 risks that we face.

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

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

Thank you, Eirik. Good morning, and good afternoon, everyone. Thank you for joining DHT's First Quarter 2018 Earnings Call. We will take you through a presentation with the highlights of the quarter and include commentary on our recently announced refinancing. We will further provide an update on cash breakeven levels and operating leverage, rounding it up with some market observations before we then open up for Q&A.

With no income market to start off from, the first quarter proved to be a very tough period. Our bottom line resulted with a $9 million loss equaled to $0.06 per share. All things considered, we are nevertheless pleased with our operating performance. The result derived from our VLCC's earning $21,400 per day. Our week spot earnings was $20,200 per day. The result includes a onetime effect as a consequence of our industry in general implementing IFRS 15 starting this year. If not adopted and in the spirit of full disclosure, spot earnings will otherwise have been $18,400 per day, still a decent number when considering the lackluster markets.

As of today, we have booked 55% of our second quarter capacity at $14,200 per day. Market-wise, we do not offer much encouragement for the remainder of the second quarter other than the commitment from everyone at DHT continuing to work hard towards a best possible performance.

As recently announced, we refinanced 13 of our VLCCs and increased our revolving credit facility. Trygve will provide more color to this later on.

Subsequent to the first quarter, we took the delivery of the first of our 4 newbuildings scheduled for this year. DHT Stallion was delivered on April 27 from DSME.

Then to the income statement. Our EBITDA came in at $24 million. Net results was a loss of $9 million equal to $0.06 per share. OpEx for the quarter was $7,600 per day for the VLCCs and tracks our average OpEx in 2017 of $7,800 per day. This competitive number is not a response to the weak market. It is simply a result of our long-term focus on quality operations and quality assets, combined with focused work from everyone on shore and on board our ships. Let us take this opportunity to say, well done to all.

G&A of $5 million for the quarter includes noncash charges typically expensed during this period. We have an excess to pay a cash dividend for the 33rd consecutive quarter. A dividend of $0.02 for the quarter is payable on May 30 to shareholders of record as of May 21.

We then move on to the balance sheet. Our balance sheet remains sound and healthy. The quarter ended with $70 million on cash. This does not include our undrawn credit facility of $57 million, hence this provides additional liquidity. Financial leverage is moderate with interest-bearing debt to total assets just below 50% based on market values for the ships. As mentioned, we have started to take delivery of our 4 newbuildings this year. Total remaining newbuilding CapEx net of borrowings now amount to only $3.5 million. This consists of net positive of $9.2 million during the second quarter as we will borrow slightly more than the final installments due to the shipyard, less $12.7 million during the third quarter for the last 2 years.

Next we'll walk you through the cash flow highlights for the period. We had positive cash flow from operations as EBITDA-covered debt amortization, interest paid and maintenance CapEx. After operations, we had net proceeds of $12 million from the sale of DHT Utik and paid $17.5 million in newbuilding installments, as such, ending the quarter with $70 million in cash.

And then over to Trygve.

Thank you, Svein. As previously announced, we have recently entered into a new credit facility that will replace 4 existing facilities, one of which was coming to maturity in the fourth quarter next year. We're very pleased with the structure in terms of the new facility, and we are honored by the massive support received from our 9 banks. All banks are participating in the new deal, and it was oversubscribed by some 60%. We consider this a good refinancing for DHT for 3 main reasons. One, we have preempted some potential refinancing risk associated with the Samco facility, which had final maturity in the fourth quarter next year. Two, we have increased liquidity by about $32 million, about $19 million net from the additional borrowing and $13 million from the increase of the revolver. Three, despite the increased borrowing, the refinancing reduces our cash breakeven, albeit marginally. This is possible through a reduced margin some 10 basis points lower than the average of the 4 retiring facilities and by a longer repayment profile.

Then onto cash breakeven. Our spot VLCC cash breakeven currently stands in the high-19,000s per day. This is somewhat higher than what it has been in the past and is primarily a consequence of lower fixed rates on the ships and time charters. It is not a reflection of escalating costs. While at the topic, we should remind everyone that our cash breakeven includes full debt amortization, which amounts to some $6,600 per day. You should keep this in mind when you compare our numbers to that of other tanker owners who may not have similar debt amortization built in. We also have a competitive cash breakeven and our healthy balance sheet gives us staying power in a low market, the operational leverage of DHT gives us tremendous upside participation once the market recovers.

On this slide, we have listed the relationship between spot rates and estimated earnings per share for 2019. At historic average rates some $43,800 a day over the past 20 years, we estimate an EPS of about $1.25 for 2019. And if and when we get to rates in the mid-60s, like we had in 2015, we should see EPS north of $2.50. We think this combination of financial staying power and serious upside potential will make DHT a compelling investment proposition at this point.

It is never easy to call the turning points of the tanker market. So rather than guessing on that, we would like to highlight what we consider the main tanker market themes that ought to be recognized and monitored in the months ahead. First, we should not forget that global oil demand is strong. IEA is forecasting 1.5 million barrels per day growth this year, and importantly, 60% of that comes from Asia Pacific, and they need seaborne transportation, most of it long-haul and in big ships. Second, the freight market remains weak and has disappointed this winter. We believe there has been too much talk about the market being oversupplied. You may consider it semantics, but we think of it as "under demanded." According to ClipperData, the number of VLCC loadings out of the Arabian Gulf over the past 4 quarters is down some 106 cargoes compared to the preceding 4 quarters. That equates to 9 VLCC cargoes per month, which is not insignificant. The OPEC production cut is certainly taking its toll. Third, as a consequence of the OPEC cuts, we're in a significant oil inventory blowdown phase. In the fourth quarter last year, the world consumed some 1.5 million barrels per day from inventories. In February, this year, the draw was almost 1 million barrels a day, 3x the normal for the month according to Energy Aspects. Clearly, this cannot go on forever. And once the inventory cycle changes, it will be good for the tanker market. Fourth, U.S. crude exports is going from strength to strength. We have seen weekly data indicating exports pushing towards 2.5 million barrels per day. Last week, we saw 9 Caribbean VL cargoes in the market at the same time and 5 of them were from the United States. A lot of capital is going into projects to facilitate exports from the U.S. Gulf, be it in pipelines, tank space, terminals or dredging projects. To us, this means that U.S. crude exports is real. It is growing and it's here to stay. Good news for tankers, of course.

Lastly, the year showed no VLCC replacement, needs are now behind us. This is simple demographics. In past years, only very few double-haul VLCCs came to the end of their economic lives, simply because there were few VLCCs built in the mid-1990s. Going forward, this will change. Some 188 VLCCs will face fourth intermediate or 4 special survey over the next 4 years. So we have finally come to a point where we have a more normal age distribution of the fleet. And going forward, recycling of older ships will become a regular phenomenon, also for VLCCs. And that should, of course, be taken into consideration when evaluating the order book.

And with that, we would like to open up for your questions. Operator?

(Operator Instructions) We'll take our first question from Jon Chappell from Evercore.

Good job with the refinancing. Obviously, the market's been challenging and there is not much you can do about that, so you take care what you can take care of. Both of my questions are on continuing to do that taking care of what you can take care of. So the first one's on the convert. Obviously, we're still over 12 months away from the convert, but it seems to be an overhang not just for DHT, but for any companies who have kind of pending expirations of those. So I'm sure the refinancing was kind of step one towards addressing that. But how do you think about that and what are kind of the arrows in your quiver to address that one as we get closer to the day?

Yes, thanks, Jon. I think on the convert, of course, we have bought back about 1/3 of it at an average discount of about 6%. And how we're going to handle the rest we see it can play out in a couple of different -- or a few different ways. Number one, it -- just to remind everyone, it would really only take some 10% increase in ship values for our NAV to reach the strike price, and we think that this could quite easily happen over the next 1.5 years. Secondly, there's $105 million outstanding. And if you ask the question what would we need to earn over the next 5 quarters in order to generate the $105 million of free cash, the answer is about $28,800 per day. And whilst we are certainly below that today, it's not really a big stretch of the imagination to see that we could make an average of that going through third quarter next year. And then of course, we could sell ships, be it outright or in the sales and leaseback basis. And then finally, we have the revolver now of $57 million, so that could be used in combination of either the sort of a increased earnings or some sale leasebacks or outright sales. So we quite frankly think that we have sufficient ways to deal with the maturity of the convertible in October next year.

Okay, great. And then my second one and it kind of goes together too. But you have a very unique return of capital to shareholders policy, where it's not just dividend, but you give yourself the optionality of doing dividends and buying backs. Last quarter, you -- I can't remember if you gave the exact number, but insinuated range of your NAV. But it seems like in the last 3 months, you just stuck to the dividend and there were no share buybacks, despite the stock still at a discount. How do you think about that overall, and let's add the buying back of the convert in there as well? Do you feel it's important to keep the $0.02 dividend for the investors through this downturn? Or could you be a bit more nimble with either buying back the common equity or the convert?

Of course, it's the board's decision quarter-to-quarter how we are actually going to allocate it. But I think, we have felt it has been important to return some capital to shareholders. And of course, $0.02 amounts to about $2.8 million so -- per quarter, and in terms of buyback, that doesn't really get you very far. So I think, that's part of the rationale why we have elected to pay the $0.02 in cash rather than in formal buybacks.

And then would you imagine and I know once again, board decision, but you've laid out not an optimistic view, but maybe a realistic view that we're at the bottom of the tanker market, and as we kind of come off the bottom there and maybe maintaining the $0.02 base, just as a placeholder, and then maybe shifting some of the newfound operating cash flow to buybacks might be a better way to manage the beginnings of an eventual recovery.

Yes. I think that makes a lot of sense, so I would agree to that.

Our next question is from Fotis Giannakoulis from Morgan Stanley.

It seems the liquidity has been strengthened significantly after the latest refinancing. I want to ask about the funding of newbuildings. It seems that you still have availability of another $96 million. Is that correct? Can you draw down the entire $96 million from the $300 million Nordea facility at this point?

No. I think that's part of the refinancing. So if it's the 2 Hyundai ships you're talking about, that is now part of the new 385 -- $485 million.

Okay, all right. Okay. And can you give us comparison of this -- the numbers that you report, I assume, they are for the second quarter, the IFRS numbers. What would be the impact if they were in the previous system just trying to compare apples-to-apples with other companies?

So the bookings for second quarter to date is essentially a discharge to discharge and there is no IFRS adjustment in those. And all in all, those numbers when we exit the accounting period for the quarter, whether there is a positive or negative carryover.

Okay. That's very clear. And can you talk about asset values? We have seen older vessels, everything above 15 years old, pretty much is selling for scrap. Do you view that these vessels pretty much they have no more useful life? And how do you expect asset values to move forward? It seems a little bit strange the fact that the market is so weak at this point, but modern ships, they seem to have moved higher rather than lower. Are there opportunities for you to take advantage of the weakness and try to snap a few more assets at this point and perhaps, even issuing shares to companies that they would like to do a stock transaction? Is this something that you would consider?

I think our balance sheet today we'll -- we will keep it as it is. We will not use the balance sheet and the reserves we have to acquire ships. If those transactions stay similar to what we did last year when we acquired BW Group's VLCC fleet, we issued stock at NAV and brought their ships at the like-for-like transaction. And that transaction was immediately accretive to the shareholders. And if there are similar opportunities, we'll certainly take a very close look at that. When you talk about older ships, it's not so that they necessarily will be obsolete. But of course, it's the question of when you buy them and the older ships get closer to the recovery you should eventually be. And I think that some of the pricing on the ships that are in the, say, 15- to 20-year old range, today are impacted by that so to speak. Current earnings are meager. You have maintenance CapEx coming up and some regulatory challenges as well. So that's why the delta around the scrap is so thin. So -- and of course, if you time it perfectly, you buy 15- or 18-year-old ship 2 weeks before the market recovers, could be a very good investment, but there is some risk to that pricing.

And...

When it comes to -- just to comment on asset prices. So you see newbuilding prices up at least 10% over the past, I would say, 10, 12, 15 months. So if you recall in January last year, we contracted 2 ships big deadweights with a high specification, including scrubbers, just around $80 million mark. If you were to repeat that today, they will start with a 9. So -- and delivery would be second half 2020 and some yards even will close that in 2021. I think that impacts the pricing of speciality ships that are, say, up to the 4-, 5-, 6-, 7-year mark, so very few things to buy. And if you have a quality ship coming from a quality shipyard in that vintage, I think it will be quickly sold.

And can you remind us about the upcoming costs from new regulations? It seems that the ballast water expense is moving lower. What would that be for VLCC right now? I assume that the $1.5 million we are talking about a year ago seems too high at this point. And also if you can comment about the steps that the refining industry is taking in order to meet the 2020 low sulfur regulation. And whether you're seeing that there is a chance that there is going to be a problem of -- with availability of low sulfur fuel that might create some postponement of the implementation of the new regulation?

Well, to answer your ballast water treatment questing first, the cost of the equipment itself is close to $1 million. And if you want to retrofit the ship, you need to -- there's a lot of other work in terms of allocating space, pipelines, pumps, et cetera. So I think, you're still looking at the $2 million to $2.5 million total cost on the assumption that you already do this in connection with the scheduled dry-dock for ballast water treatment. And on to the 2020 sulfur aspect, there is a myriad of analysis and opinions out there. And I think, especially, in shipping, in general, people are at least a step away or removed from the refining industry. When talking to refiners, you get a sense that at least number of the big ones are confident that compliancy will be available in some shape or form. But it -- there is a price they at least, said, talking to their own books, it will be expensive. Whatever that price delta will be, of course, time will tell how this will play out. But we really think that compliance will become available, maybe not everything on January 1, 2020, but that the industry will have to adopt to this, and they certainly are available or able to do that. We also met some other people and you see a lot of entrepreneurial spirits moving into this field, also looking to ensure compliancy can be made available from smaller refining plants and so forth, so -- at rather limited CapEx. So I think, there will be a lot of developments up to this date and it's very hard to say that it's one answer to all of these.

(Operator Instructions) So our next question comes from Noah Parquette from JPMorgan.

I wanted to ask about the refinancing. It sounds like the BW facility is part of the apple. What other facilities or vessels are part of that refinancing?

The BW is the one that's not part of it. And so...

But did you say the $96 million? The $96 million on the newbuilds is part of the refinancing though?

On Fotis' question, there is -- there are 2 sets of newbuilds. There's 2 from DSME that we came -- that came with the BW transaction. They are not part of the refinancing.

And that's $96 million.

Yes.

The cost of the BW facility.

In note 4, you will see these facilities. And it's the one with ABN Amro $118 million outstanding. It's the Nordea Samco facility with $215 million and it's the Leopard with Nordea that's been refinanced plus the newbuilding facility for the Mustang and Bronco from Hyundai.

Okay, great. And just a follow-up on the sulfur regulations. Remind me, do your newbuilds have scrubbers installed? And if -- and then, in terms of your existing fleet, are you considering retrofits?

The 2 newbuildings from Hyundai, the Mustang and Bronco, they have scrubbers. And we are, of course, looking closely into this. We have had a number of meetings with equipment suppliers, done some desktop engineering work on what will it take to retrofit and so forth. So there is no conclusion beyond the decision we took to put scrubbers on the 2 Hyundai newbuildings as of yet.

Okay. And then just finally, have you given some thought to how the regulations will affect VLCCs on the demand side? How much are -- is fuel oil freight part of your cargo mix? And what other things are you thinking about?

In terms of transporting heavy fuel oil, you mean? That's the question?

Yes.

Yes, of course...

What do you think the effects of the -- on the demand side will be?

Frankly, I think, it's a bit hard to say. But some talks and analysis suggest that the market will be lone heavy fuel oil and maybe that needs to find new homes and so forth. But the question, of course, when it comes to who's going to take it? And that's the confusion also analysis. Some other research suggest that the refiners will kind of move up to the challenge and those try to create different products out of also these type of feedstock. It's also a question of geographically where will this stuff be available? And are there other products they can produce? I think, it's very hard to have a specific opinion on this. We think the long-term problem really here is that, the market will end up consuming compliant fuel. And it's so few ships today that is being fitted with equipment to handle heavy fuel oil, but the refining industry, I think, would be doing a rather daring stunt if they are betting on big upload of heavy fuel oil to the marine industry. So...

We'll now move to our next question from Michael Webber from Wells Fargo Securities.

I just wanted to follow-up on Slide 13 or just down the slide (inaudible) evaluation. I know you touched a bit on forward-looking asset values. But just curious, how wide right now is the bid ask in terms of maybe just from VLCC? If we think about values in the mid- to low-80s, I think roughly $83 million, $84 million. Do you think the worst is behind us from an asset-value perspective and -- which would imply we've seen the lowest, we're going to see this cycle from your NAV?

I don't think it's important that those are recognized. It's not like that, the transactions are every day here. So it's not like you can sit and push a button and buy or sell a ship. So there was a couple of resales made available here for -- over the past few months. One owner was looking at that. If my recollection is correct, that is -- the bid-ask delta was a couple of million. I think the project sort of fizzled out and -- because those ships didn't have specification that maybe the buyer essentially wanted. So they went ahead and ordered their own ships. So -- and those ships are available. But the price tag of those have been moving up over the past 6 months. I think earlier this year that owner willing to resale these contracts. We're looking at number somewhere in the low 80s. Recently, that's been pushed up in the mid-high 80s. So -- but there are very few data points so to speak. So it's not much activity, but I think if you say for scrubber, for that -- those contracts, we're willing to put down and getting 86, 87, 88 scrubber, we probably get them. So...

Got you. Understood. I want to follow-up on IFRS 15, actually. It looks like it is a bit fortuitous and so the spec wasn't general around adoption there at a point where earnings were tough. So it's a bit less accentuated to think about it. You've actually got plenty of benefit out of it. For the quarter, I'm just curious when you look at it on a go-forward basis, you wanted to think like it should introduce a decent amount of extra volatility into earnings stream just a way -- in terms of the way you're recognizing latent and nonlatent revenue and expenses. Do you have a sense -- one, do have the ability to smooth that out at all in terms of maybe shorter interim contract structures that might account for ballast-led revenue in some other way? And then two, around the disaggregation of your contract. I think, you guys actually have chosen not to disaggregate based on the fact that they were all effectively applied to the same trade. I'm just curious, was there -- is there a contract length or tenor associated with the charter that would have forced you guys to disaggregate that? That's more of a question just around how the sector adopts or adapts rather to the new standards?

I think it's important -- it really only applies to your spot voyages, so your time charters continues with an unchanged accounting. And sure enough, there would be added volatility because under the new machines, you will have longer periods and according to IFRS 15, you have no revenue. And then once you have revenue, you will have a higher revenue. So if you have a small fleet, it can be very erratic. But of course, once you get up in size, the sort of quarter-to-quarter volatility should be quite limited. And keep in mind that throughout last year, we along with, I guess, everybody else, were recognizing revenue from the charter party date until discharge. So it wasn't like olden days when it was really from discharge port to discharge port. And now we're taking the step 1 or 1 step further, it's not from the time you entered and spot contracted from the time you load the cargo. For us, and I think for the entire industry, it's been -- we've been scratching our heads how to get around this, and there's been an industry task force in dialogue with the big accounting firms and with SEC and so forth. And I think, it's pretty uniform how we have all landed on it that we will have to recognize it only from low port, but that we actually capitalized the broker expenses from charter party date until low port.

And if I may just add. I think, this is really the demonstration of the brain trust in the accounting industry, trying to make an old pro, fit into the accounting standards. This total disregard for how this industry commercially would work, everybody knows that when you consider a voyage, you look for discharge to discharge and that's the numbers and how you operate, right? So unfortunately, we have to live up to this, but it's the way it is, and everybody will have to do it, so this creates a bit more challenges, like I said, for everybody to really get into the detail, so what the numbers mean.

We'll now move to our next question from James Jang from Maxim Group.

So we're seeing scrapping start to pick up and it seems -- it's finally good news for the supply side. But what have you guys seen in terms of capacity at the scrapyards over in Southeast Asia, especially with the monsoon season coming up ahead, yes.

It's fair to say there are quite a large number of yards that connects to take ships and dismantle them. I think the key here is what is the demand for that type of recycled steel to the local steel mills, what is the financing available for people to buy ships for cash and hold it on until they get them dismantled, they have to sell all the bits and pieces. So this is probably where the sort of hurdle is. But there seems to be good activity. We count at least 23 ships year-to-date in our numbers. And we will not be surprised to see that hit at least 40 ships this year seriously going further. The prices seems to be relatively stable, although they moved down say from $450, $460 to down to $430, $435, but it's still a good number. And considering sort of the cocktail of a weak freight market, a good price for an older ship to retire and with upcoming CapEx, it certainly -- it's a good argument for these guys to call it off. But we would expect the trend to...

Do you think if...

Sort of continue, maybe not on a full year basis.

Yes, sorry, go ahead.

We expect the trend sort of to continue but maybe not a truly on annualized basis as you have obviously seen at (inaudible).

So in your opinion, if, let's say LDT prices -- they're in the $430 to $450 range now. If they fall to the $80s like they were in '16, do you think that scrapping will kind of decelerate a bit? Or do you think that the upcoming CapEx requirements are going to still push ahead these older tonnage to be scrapped?

It's hard to be that specific, James. But I think, if you look at it in like, say, on the assumption that if the freight party continues at current levels, of course, that doesn't give much encouragement to some of these guys. But these things come together. And -- so $318 historical context is also a still decent number. So...

And our thesis has been around U.S. exports expanding to mile. But with the U.S. China trade war ongoing right now, do see more loadings -- Russian loadings to China supplying, I think, U.S. cargoes? Or do you not see that as the case?

A meaningful portion of Russian barrels to China is hotlined. There is a trade from Russian Pacific, Kozmino, specifically going into China, that's an Aframax business. That's been some -- Suezmax is also doing that. But it's not like this is substituting the bigger volumes from some of the other suppliers. So -- and there is also a question of, is it the trade war, yes? Or is it more of kind of brinksmanship and trying to get best deal possible and get things sorted. And at least, currently, it seems to be rather a tough and public negotiation more than anything else.

Yes. Okay. Then the -- so earnings they don't look good in Q2. You guys have been able to charter your vessels at much higher rates than what the market's getting. So where do you see the near-term opportunities for the VLCC sector in Q2 and Q3?

We think that the main catalyst is really going to be the inventory cycle of crude. So once that turns, you will see a good shot in the arm on our demand side. And we think that's going to transform or change the mentality in the whole freight market.

I think on the margin, you see the old position being a little bit tighter, and of course, there is some people argue that -- you take encouragement from what's been seen on the product side or MRs and so forth. That the question is, is this kind of an early sign of what is come. Some analysts are suggesting that. We're not saying it's going to be tomorrow, but these things will certainly change the earnings picture once they happen.

And so just going back to the fleet, would you guys look to -- if you guys were to sell vessels to help pay off the convert, will it be safe to assume that the 2 Aframaxes would be the best candidates for our sale? Or would you look at selling some of the older VL tonnage?

Yes. I think, your observation that -- we have phrased it recently and we are 2 Aframaxes away from being a pure VLCC company and with that you should interpret that we don’t think of the Afras as really strategic assets for us. So you're right that would be easy to sort of part ways for them given that price is right. But other than that, everything is available for the right price.

Our next question comes from Robert Silvera from R.E. Silvera & Associates Marine Surveyors.

Can you hear me clearly?

Absolutely.

I'm trying to get a little bit more clarity on what your observations are on what has been scrapped during the first quarter here? And are they truly going out for steel? Or is any of it going for other purposes off the market since storage seems to be diminishing these days? What are your observations on there? And I think, I heard you say that the value of the scrap vessels has remained about constant. And could you clarify for me about what that value is?

Yes. So today you get really paid for the light weights of the ship. VLCC sort of average weigh about 42,000 tons, and the market today, it's about $435 per light ship ton. So call that an $18 million-plus for a ship. There are a couple of 3 ships so far this year that's gone for some sort of conversion project as well. So that's also, of course, a way of retiring ships, that the vast majority of the numbers that we count today are for true demolition, i.e., the ships are being dismantled and the steel is being recycled.

How many of those did you see during the first quarter?

I think, year-to-date, we have the tally at 24 ships, maybe it's 23.

Good. Okay. The other question I have is your debt. The interest-bearing debt has been dropping nicely since the second quarter of last year. The nature of this debt is the principal fixed and you just pay interest on the debt and retire principal as you desire? Or is it scheduled principle retirement?

It is the latter. It's scheduled debt amortization on all our mortgage debt.

I see. Can you explain to me then why from quarter 4 of last year when the interest-bearing debt -- on quarter 3 rather, which was $826 million dropped to $786 million in quarter 4, which is a nice drop. And then only $22 million into quarter 1 of this year?

Part of that is we sold some ships in that time frame. So once you sell a ship, of course, you retire the remaining debt on her. So in the sort of changes in the debt, you see ordinary debt repayments and you see repayments connected to ship sales.

Okay. And the ordinary is fixed principal reduction per month type of thing?

Per quarter, yes.

Okay. And I'm very pleased with the way you are retiring debt. You seem to be managing very well, and we're pleased as shareholders.

Thank you for your support.

We'll now take our next question from Herman Hildan from Clarksons.

I just want have a very brief question, if you made up your mind on what you're going to do with the newbuildings? Are you going to charter them out as they deliver from the yards? It seems that at least the ships with scrubbers are quite popular these days.

Well, the plan is to at least in this market to keep them in the spot markets. We have not been to -- we haven't been enticed by the time charter rates that -- that's an offer. Further, some of these scrubber charters people only want delivery end of 2019. So there is not really any benefit from this we think. So the scrubber investment position on 2 Hyundais is cost that we have already taken on board, and we don't intend to give that away cheaply. So we think those ships will make very good money for the short periods of time that scrubbers will be good equipment.

It sounds like now you're kind of taking a -- so you're taking a wait-and-see approach basically as of now in terms of kind of chartering out the scrubber-fitted vessels?

I think, in general, Herman, if you look at the ships we have put up in time charters, it's not really the ecoships and that is very much by design that we would like to keep those in the spot market where we can meet the fuel efficiency gains or superior performance and keep that to DHT shareholders. So to the extent it's possible to continue to do that and put sort of the conventional ships on time charters and keeping the modern units in the spot, we would prefer to do it that way.

Keep in mind, some of the charters that's been unoffered for scrubber-fitted ships, the customers come to it with some sort of cost-based pricing across, right, which we don't have too much time quite frankly. So we've made in its investment decision, it has a great value, and we want to make as much money as we can on those investments.

(Operator Instructions) We now move to our next question from Ben Nolan from Stifel.

I appreciate it's been a long call, but I think you guys, in particular, but not exclusive to, have been doing better with this -- even making adjustments for the accounting policies have been doing better with your spot vessels than sort of what at least is being reflected in the industry indexes and whatnot. Was curious, if you just chalk that up to being good operators or if maybe there is a little bit more of a fundamental change and I know there in one other area -- in the product tanker market, for instance, where you see a lot of triangulation. It's sometimes hard to get a good fix on it. And with all the U.S. cargoes and Atlantic cargoes, in general, coming into market, are you starting to see more triangulation that may be helping that spot number to be better than what would otherwise be?

I think, Ben, it's kind of combination of things. Firstly, we have a high-quality fleets, and also with good fuel economics broadly. So -- and the ships have an excellent -- I think that's distinct and can really fix with pretty much everybody. So that's a starting point that you have, really topmost equipment. And I think secondly, our team has been able to trade the ships very well. There is some triangulation here, but there's also a mix of other types of niche freights with more traditional routes. So it's a mix of things, it's not just one thing that stand out.

Okay. So at least in your view, there's not a shift in sort of how the -- how we should think about spot rates for the industry and trying to think through increased triangulation or something?

I think, what's important to recognize and remind about is that what you see on the ship broker reports is typically a -- sort of the conventional 10-year-old ship or whatever on a round trip it is, and that's the return it would give on the current oil scale rates with the current bunker prices. And as Svein said, if you have an ecoship, your numbers are going to be some $5,000; $6,000; $7,000 a day better than that. And if you can get better utilization and a 50% ballast, that's also going to help. So all these factors play into it. But I think, the most important is really the assumptions going into the broker reports.

Our next question is from Randy Giveans from Jefferies.

Lots of questions to follow-up on earlier. But I'll follow-up on that Ben's most recent one there. So current VLCC crude rates, Clarksons is saying like $4,100 a day, Howe Robinson is saying $7,200 for Vs and $12,000 for eco-Vs. What are current rates at? I know you said the first 55% of the quarter was already kind of given, but what are rates kind of this week as you're seeing?

If you take a 10-year-old ship on a AG Far East round trip to China, market is $8,000 there I would say or average it's still a good 10-year-old ship. West Africa is maybe $1,000 or $2,000 a day higher. If you add an ecoship into that, you're looking at $13,000; $14,000; $15,000 depending on the ship and the route. And if you then manage to do the longer triangulation or even round trips, also again, then with a modern ship, you're moving into the kind of mid-teens potentially here. But then the liquidity in that freight is of course thinner than those in the AG Far East route. So this is moving every week. And then keep in mind, it also comes down to what kind of bunker inventory do you have on your ship. If it's 30 or 40 days old, they're lower priced than what the bunker price is today, then your return might be better and so forth. So it's hard to kind of sort of jam all this into a spreadsheet, I'm afraid.

Sure. Okay. And then, I guess, just one another question. Looking at G&A, I know the fourth quarter had that reversal of crude expenses totaling, I think, $2.4 million, so that would have been around $4 million. Now 1Q increased about $5 million, still well below the $6.3 million in 1Q '17. So it's jumping around a little bit, and so just trying to get a good run rate for G&A throughout 2018, 2019?

Just keep in mind that the first quarter G&A includes noncash charges of $1.2 million. That is then predominantly associated with shares issued to the management and board and that typically takes place in the first quarter. So cash G&A is certainly lower than $5 million. So...

Our next question comes from James Jang from Maxim Group.

Just one final question. With the spot market kind of in the trough right now, have you had more inquiries on period rates? Or like what's the status of that? Because it seems period rates are lot stronger than the current short-term rates.

I think you know liquidity in the current market, that itself is very, very thin. Of course, if you're willing to fix out these to see in below $15,000 a day, you might get someone to buy it. I think the challenge today, if you're going to have a meaningful rate, people would like to have options, maybe not just 1 year, but 2 years and the rates for those options are fixed at very unattractive numbers, frankly. So we haven't spent too much time on this because we don't think that, that type of businesses is of any interest to us.

Okay. And have you had any inquiries on the newbuilds that are coming -- that are being delivered this year for period rates? Or is that being the same -- is that the same thing with the rest of the vessels right now?

We have opportunities to look at those, both with the delivery ex yard, but also with forward delivery. But again we don't really think those numbers are very attractive. So...

And just to confirm that we have no further questions in the queue at this time. So I'll turn the conference back to you gentlemen for any additional or closing remarks.

We would just say thank you to everyone for your continued interest in DHT. Thanks a lot. And have a good day.

Ladies and gentlemen, just to advise this now concludes today's conference call. Thank you for your participation. You may now disconnect.