DHT Holdings Inc (DHT) 2023 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Q1 2023 DHT Holdings Earnings Conference Call. (Operator Instructions) Please be advised, today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Laila Halvorsen, CFO. Please go ahead.

Thank you. Good morning and good afternoon everyone. Welcome and thank you for joining DHT Holdings First Quarter 2023 Earning Call. I'm joined by DHT's President and CEO, Svein Moxnes Harfjeld. As usual, we will go through financials and some highlights before we open up for your questions. The link to the slide deck can be found on our website, dhtankers.com.

Before we get started with today's call, I would like to make the following remarks. A replay of this conference call will be available at our website, dhtankers.com until May 11th. In addition, our earnings press release will be available on our website and on the SEC EDGAR system as an exhibit to our Form 6-K.

As a reminder, on this conference call we will discuss matters that are forward-looking in nature. These forward-looking statements are based on our current expectations about future events as detailed in our financial report. Actual results may differ materially from the expectations reflected in these forward-looking statements. We urge you to read our periodic reports available on our website and on the SEC EDGAR system, including the risk factors in these reports for more information regarding risks that we face.

We have a solid balance sheet, represented by low leverage and significant liquidity. Financial leverage is about 18% based on market values for the ships and net debt per vessel was $12 million. The quarter ended with total liquidity of $346 million, consisting of $117 million in cash and $229 million available under a revolving credit facility. You should also note that we have no new building CapEx commitments.

We achieved revenues on TCE basis of $93.9 million during the quarter. An EBITDA of $71.9 million. Net income was $38 million, equal to $0.23 cents per share. We continue our good cost control with OpEx for the quarter at $18.4 million and G&A at $4.6 million. The vessels in the spot market earned $54,600 per day and the vessels on time charters made $35,000 per day. The weighted average TCE achieved for the quarter was $49,100 per day. Earnings were impacted by 112 scheduled (inaudible) in connection with the installation of exhaust gas cleaning systems and unscheduled (inaudible) mainly related to one of our vessels which encountered bad weather damage.

IFRS adjustment for the quarter amounted to $5.4 million, equal to $3,900 per day. Hence suggested TCE for the vessels in the spot market was $58,500 per day. The IFRS 15 adjustment is simply due to the timing of when revenue is recognized and is impacted by load dates. These earnings will be transferred into the second quarter.

We started the quarter with $125.9 million of cash. And we generated $71.9 million in EBITDA. Ordinary debt repayment and cash interest amounted to $5.4 million. And $61.9 million was allocated to shareholders through the cash dividend pertaining to the fourth quarter of 2022. We invested $14.8 million in our fleet with $2 million in maintenance CapEx and $12.8 million for installation of exhaust gas cleaning systems.

In January, we terminated 7 interest rate swaps and received $3.3 million in connection with the termination. In addition, we refinanced one of our large credit facilities with a net zero effect. And the quarter ended with $117.5 million of cash.

In January, we entered into a $405 million secured credit facility including $100 million (inaudible). This refinanced the outstanding amount on the ABN AMRO facility and is secured by 10 of the company's vessels. It is through payable and quarterly installments of $6.25 million equal to $625,000 per vessel with maturity in January 2029.

The new loan bear interest at a rate equal to SOFR plus 1.9%, which is the equivalent to LIBOR plus 1.64%. The mentioned refinancing is in line with DHT-style financing, which includes a 20-year repayment profile and a 6-year tenor. In connection with the refinancing and as mentioned on the previous slide, we terminated 7 interest rate swaps that would have matured in the second and third quarter of 2023. We received $3.3 million in cash in connection with the termination.

Switching now to capital allocation. Our dividend policy was updated last year. Our key thought behind this was the combination of our strong balance sheet. And no new building CapEx meant distributing 100% of net income good business. According to the new dividend policy, we will pay $0.23 per share for the quarter, returning $37.5 million as a quarterly cash dividend. The dividend will be payable on May 25 to shareholders of record as of May 18. And this marks the 53rd consecutive quarterly cash dividend. The shares will trade exdividend from May 17.

In March, our Board of Directors approved a renewed share repurchase program of $200 million of the company's securities. The repurchase program has a 12-month duration and replaced the prior $50 million program. We have no immediate plan to deploy this program, but like to have our toolbox equipped should the capital market present the right opportunity. With that, I will turn the call over Svein.

Thanks, Laila. Our time charter book currently consists of 7 contracts. 3 of them are coming off during the third quarter and it is our intention and ambition to rebuild the time charter portfolio through the right opportunities with the right customers. We have recently secured a 3-year time charter for the DHT Puma. The contract has a profit sharing structure that includes a fixed base rate of $33,500 per day. The profit-sharing structure is based on certain indexes with the ship's actual economics as such including the benefits of being an eco vessel fitted with a scrubber.

The first tier of earnings from the base rate to $40,000 per day will be allocated 100% to us. Earnings above this level will be equally shared between the customer and us. We have good experience with these structures from past time charters. And as an example, a reference, this time charter earned about $62,800 per day during March.

We are here updating you on our bookings today for the second quarter or '23. We expect 620 days to be covered by our term contracts at an average rate of $34,800 per day. We further expect to have 1,390 spot days for the quarter of which about 65% has been booked at an average rate of 70,300 per day. Combined, then as of today this indicates bookings of 75% of the total days at weighted average earnings of 55,800 per day. In the last line, we are estimating the spot P&L breakeven rate of $24,900 per day for the second quarter, allowing you to model a net income contribution based on your own assumptions for the unfixed spot days.

The bookings for the second quarter to date is a healthy start to the quarter, with good prospects for the quarterly cash dividend. We have, however, seen a drop in freight rate since the beginning of the quarter. Current rate for an eco-scrubber fitted vessel starts with (inaudible), though the current sentiment softening in rates. We discussed this on our prior call. And in order to avoid any misunderstanding, we take the liberty to show this slide again. The estimated P&L breakeven for the fleet as a whole is about 27,500 per day for the remaining 3 quarters of the year. But adjusted for the fixed income that we have, the P&L breakeven for the spot fleet is about $24,600 per day.

For the remaining 3 quarters of the year, we estimate the cash breakeven for the fleet as a whole to be $18,500 per day with the spot ships requiring to make $12,800 per day for the company to be cash neutral. Keep in mind that our cash break even numbers include all true cash costs, OpEx, G&A, maintenance CapEx, cash interest and debt amortization. This illustrates a headroom of about $9,000 per day between cash breakeven and net income breakeven for the fleet. With a potential annualized cash flow of some $70 million that will be allocated to general corporate purposes. This cash flow combined with the capacity in our balance sheet will enable us to invest when the time is right and the opportunities offer rewarding prospects.

Here we provide you with an update on our project to retrofit the remainder of our fleet with exhaust gas cleaning systems. We have to-date completed 6 of 8 of the retrofits and just have 2 remaining. We have not fixed the time for these 2, but intend to use air pockets in the freight market to execute them. The project execution thus far has been according to plan, both from a cost perspective and in terms of planned off hire days for the ships.

The fuel spreads have alongside weakening refining margins come off, but are still offering premium earnings for the ships with systems installed. We now have 21 of 23 ships operational with systems, and plan to be 100% fitted within this year. As we have mentioned earlier, these ships are the focal point of clients wanting to pursue term charters.

On this slide we illustrate developments in seaborn crude transportation over the past 2 years or so and ton mile development over the same time period. As you're all aware, the conflict between Russia and Ukraine disrupted trade patterns which draw premium earnings for our smaller siblings. With a slightly longer retrospect following the COVID setback, it has been a fairly steady and positive development. Importantly for DHT in particular, the graph on the left shows VLCCs handling close to 50% of seaborn crude oil on a nominal basis. Unsurprisingly, and due to its size and competitive cost of transportation, it represents about 70% when measured on a ton-mile basis.

The VLCC is a true workhorse of the crude oil transportation markets. And we think it's reasonable to expect this to prevail going forward. These are extraordinary times from a geopolitical perspective on our businesses, as one would, impacted. We shall not offer you any geopolitical analysis or act as an oil market expert. That would be beyond our capacity. However, lifting the beams a bit, the 3 basic pillars for our business are positive. We have a growing demand for oil because increasing transportation distances and basically no new supply coming on. We think we are in the early innings of experiencing the benefits of these pillars. And it would likely continue to be volatile and seasonal. OPEC+ surprised the market with its announcement a month ago. War, sticky inflation and increased interest rates, falling refining margins, raising concerns about demand and certain financial turmoil are all tempering near-term expectations. Maybe OPEC+ was ahead of the curve by trying to reduce the impact on oil price now and targeting a higher price for the forecasted recovery later this year, our 2 cents only.

China is however opening up and increasing consumption. And we do have a sense that nonOPEC supply will step up to compensate at least for parts of these impacts, and that will mean longer transportation distances. The tanker market has historically been prone for disruptions. As we speak, there are tankers involved in seizures in the Middle East Gulf. A certain significant flag state issued a security alert to its members. And we understand some owners sailing under this flag had concerns about entering the area. If this plays out, it can abruptly decrease supply of ships in this highly important loading area. This certainly has risked the upside in the freight markets.

Unrelated, there was recently an explosion followed by a significant fire and fatalities in an older tanker anchored in Southeast Asia. We are seeing incidents and now accidents related to ships in the shadow fleet. If this trend evolves, it could make users of these ships, authorities controlling territorial waters in which they transit and terminals accepting these ships think twice about accepting and using them. If this plays out, it could remove capacity. And again, it certainly has risked the upside.

There are some near-term headwinds in the market, but we think one should not let this blur the long-term tailwinds supported by the key market pillars. Going forward, our plan is consistent, and we will stick to our knitting. You should expect continued strong discipline in executing our business model and strategy. We have a great team of people in a no-nonsense company culture, all focused on delivering safe, reliable services to our customers and strong results for our shareholders. We are tuned to operate in the tanker market with a quality fleet of ships, all in the water able to generate premium revenues, a rock solid balance sheet, a low-cost structure with robust breakeven levels. We think returning 100% of net income to shareholders to be fair and square. And with that, we open up for questions.

Operator?

(Operator Instructions) And we'll now take our first question, please standby, it's from the line of Chris Tsung from Webber Research.

On that time charter for the Puma, just to confirm, if freights are $50,000, DHT gets 40% plus, another 5% of the 50%, and the upside over 40%. Is that right?

Yes, great. So above $40,000 a day on the calculator is 50-50 share of income. But I think what'SKF important to recognize there is that there is a pre-agreed calculator using this ship's specific economics. This is not a standard index shift. So the equal benefits of the ship and the scrubber benefit of the ship is in that calculation.

I see. And then for the increase or the option at the year, is that -- will that increase for the base of loan? Or is that for both the base and the profit share?

The base and the threshold for the profit share will increase.

All right. Great. That was one question. And just on the second one, on your cash flow statement, I noticed that investments in these vessels are a little bit higher than expected. Is that just for one scrubber? And how should I think about what future investments could look like?

Laila, you want to reply to that?

Yes. That's not just 1 scrubber, no. So that relates to the scrubbers installed during the quarter. But it's also worth mentioning that the cash flow effect is not timed exactly at the time of the installation. So I hope that clarifies.

Okay. Sure. And maybe just one final one before I pass it on. Just hearing about that vessel that was damaged by bad weather, how long will that vessel be out for?

The vessel is back in service, but she was out of service for a while in the first quarter. So we had some rough weather damage and that's been repaired, and that took a little while. And the ship is back fully classified and servicing its customers.

We'll now take our next question, please standby, and this is from Jonathan Chappell from Evercore.

So I'm going back to the Puma contract, that's the terms that we haven't seen really in some time across the industry, maybe from the last boom cycle pre-global financial crisis. Are those the types of contracts now that are becoming more prevalent given some of the volatility in the market and some of the long-term tailwinds that you mentioned in the presentation?

I'd say no. This is a customer on some people we know well. And it's not sort of a typical structure that is on offer, I think, in any way, but that has been developed between both the customer and ourselves and it sort of worked well for both parties. And I'd say liquidity in sort of term business is thinner now than it was, say, in the fall and made in the winter, but very few things got executed and the bid-ask spread was quite significant during the first quarter and basically nothing on top. So but we try to have close discussions with all our customers, and we do have a sense that there is a genuine concern about supply of ships over the longer term as the order book is a good example of.

And also because the significant portion of the fleet has migrated into sort of the shadow trades. The compliance fleet has shrunk quite meaningfully. So it also means that there are less sort of operators or close service providers that they would like to engage in term business with. So we expect there to be more opportunities to develop good cash flows with longer terms. And we've had some brief discussions on both 3-, 4- and 5-year opportunities, one even longer. But it takes a bit of time to develop, and there's always a little bit of spread in what the 2 parties want. But we have a sort of clear focus and ambition in developing this.

So I think over the next, say, call it, 6 to 12 months, you should expect the DHT to present more opportunities in different shapes and forms, but to get better visibility on earnings and becoming, hopefully, in the long run, a more investable business not just a trading business.

Okay. That's really helpful. My second question, you mentioned the China demand reopening, hopefully, tail. I was hoping maybe you can explain a little bit on how you've seen that transpire so far. As you noted, the market is weakened of late, OPEC cuts really haven't kicked in yet. I mean we're just in the early part of it, maybe a couple of weeks of [V] bookings. So the V is being a good proxy for kind of long-haul Chinese demand and maybe some other industries raising some yellow flags about the China reopening. Has it been what you expected it to be? And what gives you the confidence that the country will still go back strong on its crude imports?

I think as we said in the press release, right, we have to sort of really see the details of how these cuts will play out. I think one sort of reasonable -- there is also a lot of sentiment or psychology in this market, right? So just a fews back [AGE's] market, Middle East to the Far East market traded at a premium to the Atlantic market. And now sort of that is sort of, if not reversed, is probably leveled out. So that's sort of a reflection on the sentiment of expected oil coming out of the Middle East. China is, for sure, reopening, and we've seen the latest numbers that refinery runs are higher than what they were on prior months and prior quarters.

But we do think that these runs are primarily tuned to increase in domestic consumption. So we see now in the Golden Week now the mobility in China is a huge increase in flights and driving and whatnot. We're not suggesting this is a proxy for everything going forward. But it is an example that society is moving in a more normal fashion. And Golden Week is an annual event, right, and it tends to move people in the same way as maybe Thanksgiving in the own country. So that is happening.

And again, it's a bit too early to say how it plays out. Will all the cuts be implemented by the meter or, I don't know, frankly. But some level of impact, we think it will have, but oil price has not really been able to hold up, right? So I think we need to see it really happening in practice at least for the oil price to respond. So let's see what happens on that. I think that might be a good indication on how this will develop.

We'll now take our next question, please standby, this is from Omar Nokta from Jefferies.

Definitely some good color you gave in your opening comments and then just now talking with Jon about the sort of the way the market is set up. I wanted to ask obviously the OPEC cuts are -- they just started, and we've seen the impact on VLCC rates and you had the headwinds in the near term off of that. How do you think over the next several, maybe call it 3 to 6 months, how the potential to replace those barrels are shaping up? Do you think there's opportunity for cargoes out of the Atlantic Basin to potentially replace what we're not seeing from OPEC?

I think Brazil has increased their consumption steadily over quite a while now and they're up to 3.1 million, 3.2 million barrels a day. And they are supplying the Far East market in particular. And we still have one ship on a term contract to the biggest producer in Brazil. We do a lot of spot business and there's still a lot of inquiries on that. So that's sort of, I think, the most obvious area. West Africa, in general, is still lagging a little bit behind, and they haven't been able to step up production wise and for a variety of reasons. But they have the opportunity to sort of step aside for these voluntary cuts, right, because they have other operational issues.

To what extent U.S. will be able to continue to grow, we might sit closer to the action than what we are, but the latest sort of forecast we saw that people expect to increase production of maybe 0.5 million barrels a day this year. And Europe has been an increasing -- an important market for U.S. barrels. And we've done a number of shipments on the (inaudible) to Europe, which is sort of a new business. But there's still sort of steady exports going to China in particular from the U.S. So there might be some there. North Sea is now basically all Europe. So we don't really expect that to go to the Far East to the extent it used to do unless you get sort of willingness to pay for it, i.e., sort of the higher freight cost in particular, right? So it's predominantly Brazil and secondary, maybe the U.S. has something to deliver.

Got it. And then maybe just sort of -- there's been a lot of discussion here over the past few weeks about refining margins haven't come off from the very high levels earlier this year. How do you see that translating into the market? Are we seeing an effect of that lower crack spreads? Is that impacting vessel demand? And how do you see that going forward if crack spreads were to remain at these sort of levels? Does that impact of the VLCC trade? Or is it somewhat insulated from that?

I think it's worth noting that the refining spreads are so positive. So the refineries are making money. As long as they're profitable, they tend to keep the runs going, right? So it's more in the event that they turn sort of neutral or even if it's (inaudible) negative, then of course then (inaudible) and that will impact crude feedstock immediately. So I think for now, it's still okay. But of course this is an indication of maybe supply for refined products was too tight at some point, lifting this margin, and maybe now it's sort of getting into a more balanced market. But so whether it's sort of fallback in demand or whether it was just lack of supply that created those (inaudible) spreads, I'm not an expert on that, but of course it's something we have to follow because if they get too close to 0, that will impact the transportation of feedstock.

Yes. Makes sense. And maybe just one final one, just a follow-up to your answer to John, about the time charters. And you mentioned for us to see -- for us to expect DHT to do a few things later this year customer-wise. Is that just specific to time charters? Or do you see an opportunity to take maybe advantage of this potential soft patch that's ahead and acquire assets?

So far, there's no signal of at least estimated asset values to be softening. If they do, in our book, for us to make these sort of attractive opportunities, there has to be a quite meaningful correction in values. But there are different ways for us to invest. And as Laila commented on, we have extended share buyback program, but not only extended it, but also increased it in size. And a reflection of the reason for this is that, number one, of course the equity value of the company has increased as we have delevered. So we wanted to have more muscle.

But also, this is a period that if for some other reason, not just specifically in the tanker market, but if for capital market or economic reasons, things reprice negatively, buying our own ships through buying back stocks is maybe the most interesting investment as opposed to buying hard assets. So we wanted to have our toolbox ready. And if these opportunities come along, not that we necessarily wish for it to happen, but if it happens, we want to be ready. And just as an example, right. So between the summer of '21 and summer of '22, we bought back approximately 6% of the company. And at that time, very attractive share prices but from an investor perspective. So we have been able to do this in the past, and it could well happen in the future as well.

We'll now take our next question. And this is from the line of Frode Morkedal from Clarkson Securities.

I have a question on the VLCC order book, which is now approaching record lows. And as you have seen, I guess, there's been some new orders for LR2 product tankers recently. So first, could you just talk about what you think is holding back new orders for the VLCC? And secondly, what needs to change for people to start ordering vessels again?

I guess some of the interest in LR2s is maybe a reflection of the phenomenal performance that asset classes have over the last year or so, right? So they really delivered tremendous earnings. And of course, that might suggest to some people that this time is different, but things are changing. I can't say whether they are or not, but I would suspect that, that is the sort of good reason why people feel confident about that asset class. We are not studying that in detail. So I think other people are probably better-placed to comment on that. There's also been contracted of the Suezmaxes.

And I think that some simple reasons for this is that prices now nominally are of such significant value that it is a lot of money to forecast, right? And recently Suezmaxes is a bit done in the 70s. There's some down in the low 80s from maybe some of the really top yards compared to asking prices in Korea between 125 and 140 for sort of a VLCC. So just the ticket itself is significant. And so I guess, the barrier is more edible to people at a smaller ship class. You could probably do things in China on the VLCC at a lower price.

But I think another key consideration for many people with also with this amount of money being involved in such investment is that the ships will only deliver in the second half of 26 probably today. So you're looking at having debt capital for 3.5 years before you're going to earn any money. And these 4 deliveries are not offering any opportunities to, for instance, secure fixed cash flow reflecting on the value of the investment. Whereas you have another market, LNG, which is also a significant order book, but where a lot of it is being built against long-term contracts.

Another thing that maybe some of the private owners that have typically been engaged in tankers, they find the LNG sector very attractive. And one LNG carrier cost about twice as much as a VLCC and you get delivery forward, okay, but you also get a long-term contract in 5, 7, 10, 15 years. So it's a sort of a different business proposition that are attracting capital away from maybe large tankers (inaudible). We think that this just bodes very well for our space. So we welcome it. But I think those are sort of reasonable and rational reasons why you haven't seen ordering in large tankers yet.

So in order to, this to change, I guess, do you -- what needs to change investment values? It needs to rise above newbuild prices, something like that?

I think if that happens, then it's because the immediate cash flow is significant, right, and justifying those investments. I think if you -- if delivery time shortens meaningfully, so certainly it was 18 to 24 months for delivery, that might change the picture of it. And also that alternative investments are fewer or maybe not as attractive. And so I think it will take a bit of time. And if we move forward, maybe prices will adjust. But of course we had also inflation on equipment and labor costs, et cetera, et cetera. So it doesn't mean that sort of newbuilding prices will fall back to where they were 2, 3 years ago. So I don't think there's going to be a lot of ordering actually in VLCC for a good time to come. And we will take it for sure.

Perfect. That's encouraging.

Yes, we think so.

Yes. So my second question is very simply, you mentioned DHT-style financing. Could you just elaborate on that, what that means?

Yes. So as Laila mentioned, and we said on a few calls, there is 2 sort of key elements to it. One is that compared to what is the normal norm in the market is that as opposed to doing a 5-year tenure on the loan, we do a 6-year tenure on the loan. And a key reason for that is that we typically like to refinance before debt becomes short-term, which is it will be the last 12 months of a loan. So if you want to refinance on a 5-year loan, you need to do it at the end of the fourth year. So it becomes rather short project compared to the fees that we have to pay upfront, et cetera. So we managed to negotiate this with the banks to get it into a 6-year period. So essentially we look at the refinancing latest at the end of the fifth year. So that makes more sense to us.

Secondly is that the amortization of the loan is based on a 20-year economic life on the ship, assuming it's a new building. And this is a 10-year-old ship, it's a 10-year remaining life, right, whereas most of the loans that you will see in commodity shipping like tankers, they have tenures or repayment profile of 15, 16, 17, maybe 18 years, meaning higher amort per year, right, so slightly deeper profile. And we like this because 20 years has supported cash breakeven levels for us.

We paid probably a little bit external margin to achieve this, but we think that has been a meaningful trade-off in how we want to run the company. So there are also a number of other features inside this that is not disclosed in detail, but that makes us manage just our balance sheet and our debt side very efficiently, we think. So this is now -- is not set in stone. It's at least a good practice when we do financing, that it's a repeat really our terms every time (inaudible) these features.

We'll now take our next question, please standby. This is from Robert Silvera from R.E. Silvera & Associates.

One of the things I wanted to compliment you on is a few years ago, 2 to 3 years ago, we were at $900 million plus in debt. And now you're down significantly to $369 million. And in that interim period of time, for whatever reasons, I think one of the greatest ones is the tremendous reduction in debt the way you ran the company and the price of the shares has more than doubled in that interim period of time. So it reflects good management. And I think significantly the reduction of debt. Now one of the things you've talked about as far as the new order book, could you mention what you see as having happened in the scrap rate? Do you see the scrap rates staying steady, increasing because of time on ships, et cetera? Could you give us a picture of that?

Yes, that's a good question. So now we're essentially seeing zero scrapping of large tankers. Brokers estimate that you could get about $520 per light ship ton for a tanker or VLCC. And VLCCs are typically, they have a weight between, call it, 42,000 and 48,000 tons depending on the design of the (inaudible) and size and so forth. But there's nothing going on. And I think a key reason for that is that the operators in the shadow market, the gray or black or sanction trades, call it whatever you like, they have had a willingness and an ability to pay a significant premium for all tankers way above the theoretical scrap price. So it's sort of been an alternative market or alternative use or, to get rid of these ships.

These ships, they serve a purpose, if you like, much less productivity than the compliance fleet. So but it's a bit of a nuisance. And as we've said earlier, we think this could be sort of the new scrapping at some point that these ships are essentially disappearing from the trade eventually. And some of them are getting very well old. So in the near term, it doesn't seem to be willingness to -- from the selling side to sell into scrapping because the price to get is lower than selling it for further trade into the sanction business or for the scrap yards, they don't have the ability to pay the price that the competition is willing to pay. So it's sort of a very big bid-ask spread that is just putting that market to complete halt.

So you'd say net-net, the fleet is staying pretty much the same size then?

Yes, for the foreseeable future, I would think so. And then maybe next year, maybe 2. But then some of these ships are getting very long in the tooth. And many of them will have to go to dry dock and spend money. Some of them will have to install maybe balance water systems to be able to trade, depending on the trade they do. So there's going to be CapEx for some of these ships. And then the remaining life is so short, so maybe some of them will just say, bite the bullet and say, okay, let's get rid of this lady now and we'll move on. But I think also this is the reason why the operators in that trade have bought older ships because they know that that market hasn't got long legs. It's a period for 1, 2, 3 years, they can play around with this. And then it's a risk of that market disappearing, if you understand what I'm saying.

Yes. Very good. Anyhow, you talk about share buybacks. As a shareholder of thousands of shares, I'd like to put my input in from the standpoint of we would like to see you not do share buybacks at all, but rather accelerate further debt reduction, say, take the over $100 million of cash and apply $25 million to debt, and that brings me to the idea of what would be your breakeven if you got down to in a theoretical way, and if you got down to 0 debt, where would our breakevens go to from where they are today?

Yes. So if you look at our past sort of practice, number one of course, we are committed to the cash dividend and the formula we have on that, 100% of net income. So that's going to be in place. And if at all, we were to consider buybacks in the current environment, it will not be at the expense of cash dividends. It will be in addition, if we decided to do it. What we have done in the past when it comes to buybacks, we've been quite opportunistic.

So it's been in pockets where the share price have been really dislocated from the prospects on the general market, whereby we felt that, that was like buying a ship in the market just at a very big discount. So it was sort of adding earnings growth to the company, if you like, by reducing the outstanding shares. So it has sort of a third priority. We will still like to continue to delever. And so I think with the cash flow we are generating, if we are, say -- even if we were [fair on] net income, we still generate cash that will enable us to do maybe a bit of both or with priority potentially towards delevering. So in order of priority, so cash dividends, delevering and then buybacks.

Well, we, as shareholders in our group, particularly favor the reduction of leverage. One of my last question would be this. Over this past year, the number of shares increased by over 333,000. Are we to expect that this year that we're in now we can expect the same kind of increase again?

So the company has a long-term incentive program in place for Board and management that involves stocks. It's predominantly -- it's restricted to stock units. They are mostly -- they have some vesting criteria. There's different structures and tranches. So it depends on whether only some or all of them will vest or not. So when we present our annual 20-F, then you will see what has been done in the prior year, right? But we are not printing shares to raise money or selling stock in the market. It's only related to the long-term incentive program for Board and management.

I just want to compliment you guys. I think you've done a tremendous job over the last few years doing debt reduction and just running the company in a difficult situation.

And there are no further questions at this time. So I'll hand the conference back to the speakers.

Well, thank you very much to all for listening in on DHT and following our company. That's most appreciated. And we're wishing you all a continued good day. Bye-bye.

Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.