Q2 2017 DHT Holdings Inc Earnings Call

Aug 09, 2017 AM CEST
DHT - DHT Holdings Inc
Q2 2017 DHT Holdings Inc Earnings Call
Aug 09, 2017 / 12:00PM GMT 

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Corporate Participants
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   *  Eirik Uboe
      DHT Holdings, Inc. - CFO
   *  Svein Moxnes Harfjeld
      DHT Holdings, Inc. - Co-CEO
   *  Trygve Preben Munthe
      DHT Holdings, Inc. - Co-CEO

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Conference Call Participants
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   *  Benjamin J. Nolan
      Stifel, Nicolaus & Company, Incorporated, Research Division - Director and Senior Analyst
   *  Fotis Giannakoulis
      Morgan Stanley, Research Division - VP, Research
   *  Han Jang
      Maxim Group LLC, Research Division - VP & Senior Equity Analyst
   *  Jonathan B. Chappell
      Evercore ISI, Research Division - Senior MD and Fundamental Research Analyst
   *  Magnus Sven Fyhr
      Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst
   *  Noah Robert Parquette
      JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst 
   *  Ronald E. Silvera

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Presentation
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Operator   [1]
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 Good day, and welcome to the Q2 2017 DHT Holdings, Inc., Earnings Conference Call. Today's conference is being recorded.

 At this time, I'd like to turn the conference over to Mr. Eirik Uboe. Please go ahead, sir.

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 Eirik Uboe,  DHT Holdings, Inc. - CFO   [2]
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 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 August 16, 2017. In addition, our earnings press will be available on our website and on the SEC's EDGAR system, 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; the early 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 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 the risks that we face.

 I'm joined by DHT's co-CEO, Svein Moxnes Harfjeld; and Trygve Munthe. With that, I will turn the call over to Trygve.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [3]
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 Thank you, Eirik. Good morning, and good afternoon, everyone, and thank you for joining the DHT second quarter 2017 earnings call.

 As usual, we will go through a slide deck highlighting the key issues in the quarter before we open up for Q&A at the end.

 From our perspective, the second quarter was highlighted by 2 overriding issues: firstly, the closing and takeover of 9 ships and the 2 newbuilding contracts from BW Group; and secondly, the anticipated partly seasonal slowdown in the tanker freight market.

 So let's then dig into the details, starting with the highlights of the quarter. In the quarter, we generated an EBITDA of $37 million and net income of $4.8 million equal to $0.04 per share.

 Total VLCC earnings came in at 23,500 per day, what we think is a satisfactory number given the market and very importantly, the fact that we took over 9 BW ships and had to reestablish all major approvals for these given the change in ownership and technical management.

 Our technical department did an outstanding job with the takeover of the ships and with the running of the fleet in general. The VLCC OpEx in the quarter came in just over $7,600 per ship per day.

 Also, in the quarter, we tied up 2 new bank facilities. From a syndicate of 7 leading shipping banks, we secured $300 million of mortgage financing for the BW fleet at what we consider attractive terms, a margin of 250 -- 240 basis points over LIBOR, a repayment profile assuming 20-year economic life and a tenor of the loan of 6 years.

 We also firmed up an $82.5 million facility for the 2 Hyundai's newbuildings we ordered in the quarter. This was done on similar terms with a margin of 250 basis points and again, the 20-year repayment profile.

 We think these 2 facilities provided to DHT by the biggest and best shipping banks in the world speak volumes about the support and respect DHT enjoys in the shipping bank universe.

 On this slide, we show you our VLCCs earnings in more detail. As I mentioned, we generated an average of $23,500 a day for the spot fleets, whilst the 7 VLCCs on time charter during the quarter averaged $37,000 a day, giving us an overall VLCC earnings of $27,700 for the quarter. The corresponding number for the first 6 months of the year is $33,300 a day.

 And for the third quarter, we have so far booked 59% of our spot days at an average rate of $20,100 per day. As mentioned in the beginning, this softening of freight rates is not coming as a surprise. We have alluded to it in prior earnings calls and many analysts have been waiting for it for quite some time.

 The big question, of course, is how much of this is caused by seasonality and how much is other factors. We have undoubtedly been through a period with rapid fleet expansion and that has certainly taken its toll. Even though we continued to see very robust demand, both for oil and for transportation of oil.

 On top of that, we are now in the midst of the summer doldrums, so a low freight market at this point in time is not unexpected. However, if you look at the graph on this right side of the slide, you see spot VLCC rates over the past 5.5 years, and you will recognize that even in weak years, the market has trended upwards into the winter. Whilst past performance is no guarantee for the future, we do expect rates to be higher in the fourth quarter than what we currently see.

 Let us then look at the income statements. We have revenues on time charter basis of just under $60 million, sharp OpEx at $17.5 million, EBITDA of $36.7 million and net income just under $5 million, equating to $0.04 per share. For the first 6 months of the year, EBITDA is $87.3 million and net income, $19.2 million.

 Let's then turn to capital allocation. As you will recall, our policy is to return minimum 60% of ordinary net income to shareholders in the form of dividends and/or buybacks.

 For the second quarter, we will greatly exceed the 60% as we have bought back 12.2 million of our convertible notes and in addition, we will pay $0.02 per share in cash dividends. This marks the 30th consecutive quarter of cash dividends.

 Let us then go through balance sheet highlights. Our balance sheet is strong with moderate leverage and robust liquidity. Interest-bearing debt to total assets of 46.5% of book values and 51.9% of mark-to-market basis.

 Liquidity is good with $104 million of cash and an additional $47 million available under our revolving credit facility.

 During the quarter, we repaid ordinary bank debt with $25 million, consisting of $12 million related to ordinary scheduled repayments and $13 million related to sale of vessels.

 In addition, we repurchased $12.2 million of the convertible, bringing the outstanding under this facility down to $105.8 million at quarter end.

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

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [4]
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 Thank you, Trygve. We have, as you know, a keen focus on cash breakeven and it's in markets like what we are currently experiencing that it really matters. When we talk about cash breakeven, we include all true cash costs, i.e., debt repayment, interest expense, OpEx, G&A as well as maintenance CapEx for dry-docks.

 For DHT to be cash neutral during the second half of 2017, we now estimate that our spot VLCCs must earn $17,300 per day. You will note that this is an improved number from earlier communications, an improvement primarily due to having brought some maintenance CapEx related to dry-docks forward to the first half of this year.

 For 2018, the matching number is currently $19,400 per day.

 2018 is very light on maintenance CapEx with only 1 Aframax due for dry-dock. Further, we have several time charters due for potential extensions over the coming months, hence the 2018 spot cash breakeven number has room for improvement.

 We believe that these numbers put DHT in a comfortable position and that they are competitive when compared to our peers.

 Whereas cash breakeven is important in the context of downside protection and staying power, net income break even illustrates the upside potential in DHT. DHT requires about $22,500 per day for the spot VLCCs for the second half of 2017 in order to be profitable, and the corresponding number for 2018 is currently about $24,500 per day.

 Again, the 2018 number could be improved through potential extending time charter contracts during the next few months. We think these numbers are robust, and you should consider these numbers in relation to our capital allocation policy of returning minimum 60% of ordinary net income to our shareholders through buybacks and cash dividends.

 As you'll recall and as Trygve has spoken about earlier, we entered into agreement with the BW group to acquire their VLCC fleet and thereby, expanding our fleet by about 50%. We took delivery of all the 9 ships in the water during the second quarter. We further took title of 2 newbuilding contracts at Daewoo for delivery during the second quarter of next year.

 As we have stated earlier, we expect the acquisition of this fleet to be accretive to our earnings as well as creating synergies through lowering our G&A expenses per ship per day.

 We should take this opportunity to praise the entire DHT team, both onshore and onboard our ships, for their hard work and excellent team spirit in consolidating the acquired ships into our fleet in a very compact time frame.

 Our VLCC fleet now count at 36, 36 in the water and 4 scheduled for delivery during '18. Our VLCC fleet has an attractive age profile with an average age of 6.8 years.

 We continue to execute on our clearly stated strategy of investing in our fleets, keeping leverage down and returning significant capital to our shareholders.

 We are in a financially sound position with a strong balance sheet and good liquidity, and we are delivering competitive numbers on all important operational metrics.

 Further, we have the lowest in class cash breakeven levels for our spot ships and thereby, protecting the downside whilst maintaining substantial upside to our net income breakeven levels.

 All told, we believe DHT is well placed to harvest from what we expect the future to behold.

 And with that, we open up for Q&A. Operator?

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) We will take our first question today from Fotis Giannakoulis from Morgan Stanley.

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 Fotis Giannakoulis,  Morgan Stanley, Research Division - VP, Research   [2]
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 Congratulations for the profitable results in a difficult quarter. I want to ask you about the oil flows and if you see that these oil flows have decline? If you see any changes in the trading patterns in last few months? And I'm trying to also get a view from you on the compliance of the OPEC on the announced -- previously announced production cuts.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [3]
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 Thank you, Fotis. There has been changes in oil flows and maybe, in particular, as a response to the OPEC cuts, the refinery still needs feedstocks and as to the Middle East, in particular, we're trying to halt exports and productions. You've seen more barrels being sourced from the Atlantic into the Pacific. And in -- through that, they've probably been mitigating some of the impact of the OPEC cut, as to be typically a transport production and not just consumption of oil. And there are I think, a mixed bag of compliance to the OPEC cut, and there are some countries not complying and some are complying. There's talks of Libya and Nigeria's exemptions being put on hold and so forth. So -- but, all in all, the -- you will see that this is a very fluid market. It's a very liquid market and people are focusing on getting their feedstock in respect to whether production states want to focus on hiking their price through production cuts. We've also seen an increased export from the U.S. I think as most of you have seen and there is increase in these [sea] shipments. So far, mainly through reverse lightering, but there are talks of now maybe modifying or partly modifying the loop terminal to accept exports. So we would expect the trend in the U.S. exports to continue.

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 Fotis Giannakoulis,  Morgan Stanley, Research Division - VP, Research   [4]
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 I read somewhere in some of the broker's reports that the number of vessels right now, they are out of the market for maintenance or even ship-to-ship transfers. In other words, they are not participating, they're not competing at this moment. Can you tell us how many of -- vessels there are out of the market? And what is the risk that these vessels will return at some point? Is this something that's unusual, some increase in these numbers of vessels that they are offhire versus the previous times?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [5]
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 Fotis, ships being offhire for special and intermediate service is nothing unusual. It might very well be that some people have taken advantage of the weak freight environment and they actually accelerate when they do the dry-docking, similar to what do did last year. But I'm not sure that's significant factor in the freight market. And ship-to-ship transfers, that's par for the course. That's when you're discharging and even you're loading in the U.S., this is what large tankers need to do.

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 Fotis Giannakoulis,  Morgan Stanley, Research Division - VP, Research   [6]
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 I want to ask about the -- how your fellow shipowners think this market. We saw the beginning of the year certain efforts of expansion from major shipowners, including yourself. The last couple of months, 2, 3 months, there has been a slowdown in the news flow about expansion, on either secondhand or newbuilding expansion. Since you are much closer to the market, how do you view the appetite for adding tonnage or even for secondhand transactions has changed versus the previous quarter? And we are all -- all pleasantly surprised with the terms of the financing terms of your last 2 facilities, 20-year profile with extremely low margin looks very unique in this environment. Is debt financing back? Is there a risk that people will start ordering more ships?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [7]
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 I think to get to your first part of -- or your first question first. Earlier in the year as we also stated in our prior earnings call, was the rather aggressive marketing campaign done by the major yards in securing orders. And if that marketing activities is anything to go by that has certainly slowed down. And we also see that with not so first-class shipyards, it's very hard to get refunding guaranties issued. And you see some letter of intents hanging out there for quite some time and their orders are not becoming firm. So we still, I guess, stand by our prior expectations that ordering activities in the first half will not be at the same level in the second half. I think you already see signals that this is significantly slowing down. So with any luck, the order group will not grow significantly beyond where it is today.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [8]
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 And I think just to add to that, some of these options, that some owners were able to get, we know for a fact that some of them have been passed off. So we certainly think that this is cooling down.

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 Fotis Giannakoulis,  Morgan Stanley, Research Division - VP, Research   [9]
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 And regarding the financing, is there a swap factor to financing in the market right now? 20-year profile, I haven't seen for a very long time and especially with margins sub-3%.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [10]
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 I think the market has been very binary, either you have access to bank financing or you don't. For us, it's been important to get the 20-year because as you have heard so many times, we focus keenly on cash breakeven. And of course, 20-year repayment profile is far more attractive than say 16-year. But we have been able to obtain it because there's a buy-in from the banking side that they like our financing strategy. And also quite frankly, we're not asking for the moon in terms of the amount of financial leverage. We typically borrow 50% or thereabout on an acquisition cost. So no, I don't think it's a flood of cheap money available for the industry. It's available for the biggest and the strongest.

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 Fotis Giannakoulis,  Morgan Stanley, Research Division - VP, Research   [11]
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 One last question. If you can comment about this spike in scrapping activity for crude tankers the last month that was a little bit unusual. I think it's the highest number in a number of years, monthly number in a number of years. Can you comment on that? And also I don't remember if you gave any guidance of your charters or your fixtures during the third quarter. And how do you view the fourth quarter developing based on these fixtures?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [12]
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 I think the scrapping activity you saw accelerating in the second quarter was primarily in the Aframax sector. And broadly speaking, the smaller the ships, the older the fleet tends to get. So there is some work to be done on the Aframaxes fleet in the older spectrum. You've seen also some activity on the Suezmax front, and we would not be surprised to see also some of these going. So -- and in this market, people will have to question whether they're going to go through a dry-dock, especially considering the integrity of the particular ship. If steel renew or ballast tank refurbishment and so forth are required, which are very expensive, I think people today will look closely at retiring ships. We did guide on the third quarter bookings, so we stated that 59% had been secured just over $20,000 a day for the third quarter. And we do expect seasonality to prevail and, as such, we expect the fourth and the first quarter next year to be better than the current environment certainly.

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Operator   [13]
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 We will take our next question today from Magnus Fyhr from Seaport Global.

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 Magnus Sven Fyhr,  Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst   [14]
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 Just one follow-up question on the third quarter bookings. You guys have done a good job in fixing forward, and I think your rate was pretty much in line with the rest of the peer group. But it looks like the spot rates were slightly below. I know it's hard to compare quarter-to-quarter given that they don't turn over that often. But anything in particular that was going on during the quarter that was unusual besides taking delivery of the ships?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [15]
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 In the second quarter, you mean?

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 Magnus Sven Fyhr,  Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst   [16]
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 Yes.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [17]
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 I think as Trygve said...

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 Magnus Sven Fyhr,  Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst   [18]
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 No. I'm sorry, both second and third quarter. First (inaudible)

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [19]
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 So for the second quarter, as Trygve alluded to, when you take owner or change of ownership and technical management of a ship, you lose the approvals by the oil makers. And then it's a very narrow field of customers who can take your ships for the first cargo. And those are typically then fixed at a discount to the general markets or the rental-ready market. So you start off with a handicap if you like and as such, in particular, we got pleased with it, with the performance that we had in the second quarter. The third quarter, as we said, 59% of about 20 we think is a good start, but the current market is certainly lower than that. I think you can assume that the current spot market is $10,000 a day, give or take, depending on the trail and the position of the ship.

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Operator   [20]
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 We will take our next question today from Ben Nolan from Stifel.

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 Benjamin J. Nolan,  Stifel, Nicolaus & Company, Incorporated, Research Division - Director and Senior Analyst   [21]
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 So I have a handful of questions for you guys. The first has to do, obviously, again in this quarter, you were buying back those convertible bonds. With the market having weakened a bit, are you -- I'm just trying to get a sense of sort of what your mindset is with respect to the deployment of your capital. Is it now sort of at a point where you maybe think about just pulling back on that a little bit and doing what you can to sort of hedge your bets with respect to the cash flows? Or is that still something that you would look to be aggressively looking to repurchase?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [22]
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 I think it's -- when we talk about capital allocation, it's really the capital that we generate in the quarter. And in the current rate environment, we aren't generating as much cash as we have been doing in the past several quarters. So just with that as a sort of a backdrop, don't expect us to be as aggressive on buybacks as we've been in prior quarters.

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 Benjamin J. Nolan,  Stifel, Nicolaus & Company, Incorporated, Research Division - Director and Senior Analyst   [23]
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 Okay. And along those same lines, obviously, you guys have 4 newbuildings that are set to come out next year. At least today, the market looks a little softer. Do you have any flexibility on being able to perhaps toggle back the delivery dates of those vessels? And is that something you would consider doing to the extent that you have some capacity to do so?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [24]
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 We'll not discuss that with the yards. And frankly, there's not much benefit we think in that. We have our teams in place at the shipyards. Construction is going according to good progress. The ships are -- the 4 ships are staggered over a period of 6 months. So from a workload perspective, for the people up in the yards, it's kind of all works out well. So we plan to stick to this schedule.

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 Benjamin J. Nolan,  Stifel, Nicolaus & Company, Incorporated, Research Division - Director and Senior Analyst   [25]
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 Okay. And then last one for me. I know you mentioned that there's some expectation of seasonality in the fourth quarter and the first quarter as we typically see. I'm curious to maybe get a sense of how robust you would expect that seasonality to be going forward. I mean, do you think -- and I know you can't predict the market per se, but just to get a sense of whether you think this will be normal seasonality? Or perhaps a little bit light of that given sort of current state of the market?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [26]
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 I think year-to-date, we've taken pretty much 2/3 of the deliveries of newbuildings. So it's been an accelerated fleet growth here in the first 6, 7 months. That [should all] suggests that things may be a little bit better going into the second half, as we are expecting far less newbuildings delivered in. One thing is this sheer number of ships but again back to the being handicapped at the first voyage for a newbuilding. These ships as well need to take a discount in order to get going. So just the amount of ships that are showing up in the Arabian Gulf and willing to do "below market", in order to get going has been a damper on the market as well. But no, we're not going to give you any sort of guidance on whether it's going to be a usually, or unusually strong or weak seasonality this year. That's -- we've been in this industry for too long to start having opinions on that.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [27]
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 Just some color also on what we pickup in these reports from China is that some other refiners have been overbuying a bit of crude during the first half. And are cooling down some of the purchases and then burning some inventories. But the expectation is that the will come back on again in the next few months. And that combined also with a couple of new refineries opening up and of course, then we'll be looking to get fixed up. So you -- I think chances are you'll have some more activity again in China compared to the recent month-to-month numbers, which are not been so convincing.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [28]
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 I think if you take the IEA numbers and look at second half this year compared to first half, it's a very meaningful step-up in expected oil consumption. And all else being equal that would suggest a better tanker market as well.

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Operator   [29]
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 We will take our next question today from James Jang from Maxim Group.

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 Han Jang,  Maxim Group LLC, Research Division - VP & Senior Equity Analyst   [30]
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 So just couple of quick ones. One is, in terms of the ballast water treatment system or the management system. The U.S. Coast Guard, they said the IMO regulations push it out to '19 doesn't really upset vessels trading on U.S. territorial waters. So I just wanted to see what your plans were in terms of I guess, putting in a management system or treatment system on the remaining vessels.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [31]
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 So we already have systems in place on 10 on the ships in the water. As the 4 newbuildings for next year will also have these systems. And keep in mind that in the U.S., it's only related to ships that are low cargo, which is when you discharge ballast water, so you can look at this in the context of increased U.S. exports and then potentially, bringing VLCCs into or closer to U.S. Coast, but this will be relevant. And then come next year, we will have 14 modern ships with this ability. So on the older ships, we have got extensions and so forth and then, of course, and our more extended this in their own right. So on the older spectrum, we will follow this closely. And don't think we have to make any decisions as of yet from this.

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 Han Jang,  Maxim Group LLC, Research Division - VP & Senior Equity Analyst   [32]
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 Okay, great. And what are your employment plans for the BW vessels? I know (inaudible) is the only one on charter. Are you guys looking to do a mix employment profile for these vessels? Or you guys haven't decided yet?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [33]
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 These ships are not any different from -- they're all DHT ships so they follow the general strategy of DHT. We currently have big handful of the ships on time charters that some of them offer extensions. But in general terms, we don't think this is the market we need to pursue time charters as the rates are not really that attractive. And you're being tested to provide a lot of optionality to the clients. It's something that we typically are not so in favor of. So unless we have our regular clients and we see meaningful rates, then we will stay in the spot market now.

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 Han Jang,  Maxim Group LLC, Research Division - VP & Senior Equity Analyst   [34]
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 Okay. And one final one for is, for the 2 Afras that were extended, were they extended at the same rate?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [35]
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 No. They are not extended, so those charters expired -- the average [shell] has expired. We'll now enter into some shorter-term charters and they are in the low mid-teens, so.

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 Han Jang,  Maxim Group LLC, Research Division - VP & Senior Equity Analyst   [36]
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 Okay, I think I just want to clarify because I think in the latest filing, it shows that they were extended. The Cathy to '18 and the Sophie to Q4, is that still correct?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [37]
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 They have some short-term charters that initially expired and then they entered into new short-term charters at different rates again, so.

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Operator   [38]
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 We will take our next question today from Jon Chappell from Evercore.

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 Jonathan B. Chappell,  Evercore ISI, Research Division - Senior MD and Fundamental Research Analyst   [39]
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 Just 2 for you guys. First one on strategy going forward, obviously, you've integrated a pretty big fleet somewhat seamlessly thus far, and obviously, hasn't put a lot of stress on your balance sheet either. So you sit in pretty good position as far as your capital structure is concerned, financing in place for the 4 newbuilds in 2018. How do you kind of foresee the next steps for the company? Do you feel you're in the right place right now? Or do you still aggressively look to be counter seasonal?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [40]
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 When we...

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 Jonathan B. Chappell,  Evercore ISI, Research Division - Senior MD and Fundamental Research Analyst   [41]
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 Countercyclical?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [42]
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 Yes. We certainly think we're in a good position. As you said, we were able to do a big deal at low prices in the second quarter and we're here now to sort of consolidate that. And we're not on the edge of the chair to do more deals, as we speak. But as always, we are paying attention to what's available and if we can strike a meaningful deal that's accretive and enhancing to our shareholders, we will certainly pursue it. But not in -- given that we increased by 50% here just a couple of months ago, we are not as eager as we were a half a year ago.

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 Jonathan B. Chappell,  Evercore ISI, Research Division - Senior MD and Fundamental Research Analyst   [43]
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 Right. And but -- and given the weakness in the market today and I imagine that's kind of filtered through to maybe a more liquid charter market, have you explored chartering in at all? I know that hasn't been your strategy in the past, but maybe a cheaper way to get some more exposure ahead of a seasonal or cyclical upturn.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [44]
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 We -- quite frankly, we think there's plenty of upside and upside participation in DHT; the fleet that we have today and for our shareholders. So no, we're not going to add leverage by chartering in ships.

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 Jonathan B. Chappell,  Evercore ISI, Research Division - Senior MD and Fundamental Research Analyst   [45]
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 Okay, last one. I noticed that all of the shares have been issued to BW, and including the conversion to common shares of some of the preferred stock. Is there a lockup associated with that for BW?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [46]
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 There's a standstill and you can read that in the investor rights agreement that was filed in connection with acquisition. So there is a standstill of minimum 18 months and then potentially up to 5 years. So there is fair amount of details related to that, so we suggest you pick up that filing, if we may.

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Operator   [47]
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 We will take our next question today from Rob (sic) [Ron] Silvera from R E Silvera and Associates Marine Surveyors.

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 Ronald E. Silvera,    [48]
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 Thank you very much for doing the hard work you've done in a very difficult quarter. One thing I'd like to suggest, in your press release, you have columns, but the columns are not identified. Just for simplicity sake and easy the next time, if you will, identify each column, which quarter it represents, et cetera, et cetera, that would be handy. The question I had, particularly is, have you guys considered at all using some of the ships in the clean tanker market?

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [49]
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 No. The -- our ships are so-called uncoated in the cargo tanks and that's what you need when you carry crude oil. In order to carry refined products, you need to have coated cargo tanks and none of our ships have got that and so they're not, from a technical perspective, not really suitable, unless you did on the main voyage out of the shipyard you can do 1 cargo. Further in the refined products market, lots are being shipped, much smaller lots. So it's not really for the VLCCs that are able to carry 2 million barrels, so that's not really a market that we can reach into.

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 Ronald E. Silvera,    [50]
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 That what I was afraid of. Keep doing the good job that you're doing on reducing the debt. I think that is very, very critical for the next 2 years at least.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [51]
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 Thank you very much for your support. Have a good day.

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Operator   [52]
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 (Operator Instructions) We will take our next question today from Noah Parquette from JP Morgan.

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 Noah Robert Parquette,  JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst    [53]
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 Just really quick. Are you guys on the G&A side, are -- is this quarter, you do with (inaudible) additional hiring that will reflect in costs?

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [54]
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 You really broke up there, Noah, but was the question about increasing G&A as we have increased the fleet?

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 Noah Robert Parquette,  JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst    [55]
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 Yes, yes, exactly. Sorry about that.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [56]
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 Yes, no. We have added 3 people to the DHT team, 1 on chartering, 1 on operations and 1 on accounting. So that's the extent of the increase in G&A and that's going to be a very minuscule percentage increase. So if you look at G&A per ship per day, it's going to go down by about 1/3 compared to the old prior BW run rate.

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 Svein Moxnes Harfjeld,  DHT Holdings, Inc. - Co-CEO   [57]
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 As you will note in both the first and second quarter, it was a bit of noise related to all the supervisory fees. So we expect now the third quarter to be a good clean running quarter in terms of overhead cost and we will guide further on that on the next earnings call and what to expect going forward. But it will certainly be competitive.

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Operator   [58]
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 (Operator Instructions) There are no further questions at this time over the telephone.

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 Trygve Preben Munthe,  DHT Holdings, Inc. - Co-CEO   [59]
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 Okay, then we would just like to say thanks to everyone for continued interest in DHT. Thanks, and have a good day.

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Operator   [60]
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 That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.




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