DHT HOLDINGS, INC. 2026 Q2 Earnings Call

Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' second quarter 2026 earnings call. I am 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 on our website, dhtankers.com, until August 13th. 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 report 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. As usual, we will start the presentation with some financial highlights. The second quarter of 2026 was by far the strongest quarter in the company's history, reflecting strong tanker market conditions and commercial performance. In the second quarter, we achieved revenues on TCE basis of $255 million, and adjusted EBITDA of $231 million. Net income came in at $198.3 million, equal to $1.23 per share.

After adjusting for the non-cash fair value gain related to interest rate derivatives of $1.3 million, we had ordinary net income for the quarter of $197 million, equal to $1.22 per share. Vessel operating expenses for the quarter were $18.6 million, and G&A for the quarter was $5.6 million, which included approximately $0.7 million in non-recurring non-cash costs related to shares vested in the second quarter. In terms of market performance, our vessels trading in the spot market earned an average of $162,600 per day, while the vessels on time charters achieved $90,800 per day. The average combined TCE for the fleet in the quarter was $126,700 per day. Furthermore, revenue on a TCE basis for the first half of the year totaled $412.2 million, while adjusted EBITDA reached $364.3 million.

Net income was $362.9 million, exceeding DHT's previous full year record earnings of $266.3 million achieved in 2020 and establishing a new earnings milestone in the company's history. For this period, our vessels trading in the spot market earned an average of $124,700 per day, while the vessels on time charters achieved $77,300 per day. We achieved combined TCE for the fleet of $102,900 per day. We continue to maintain a very strong balance sheet, supported by conservative leverage and robust liquidity. At the end of the second quarter, total liquidity was $569 million, consisting of $161.7 million in cash and $407.5 million available under our revolving credit facilities. At quarter end, financial leverage was 14.1% based on market values for the fleet, and net debt was $11.9 million per vessel, way below estimated residual values.

Looking at our cash flow, we began the quarter with a cash balance of $126 million. During the quarter, operations generated $231 million in EBITDA. Debt repayment and cash interest totaled $20 million, and $103 million was distributed to shareholders through a cash dividend. In addition, we invested $7.2 million in vessels, $1.3 million in vessels under construction, and we also prepaid $56 million in long-term debt. Changes in working capital and other items amounted to $7.3 million, and the quarter ended with $161.7 million in cash. With that, I will turn the call over to Svein to go through the quarterly highlights.

Thank you, Laila. I will now walk through our key quarterly highlights. Strong market conditions were driven not only by fundamental supply and demand dynamics, but also by ongoing market consolidation and regional disruptions, most notably stemming from the conflict involving Iran, which drove a significant expansion of global ton-miles. Crucially, DHT's operational framework prioritizes the safety of our crew, cargo, and vessels above all else. In line with this policy, our fleet did not trade in the Persian Gulf during this period. Our teams delivered solid results through operational excellence without having to pursue trades to chase premium rates in the high-risk conflict areas. We capitalized on strong term demand by securing two additional time charter contracts during the quarter for two of our older ships.

Both the DHT Sundarbans, built 2012, and DHT Amazon, built 2011, entered into one-year contracts at an average rate of $109,000 per day. Looking to our long-term fleet development, we contracted a new build VLCC at Hanwha Ocean for early delivery in August 28th. She will be named DHT Oryx and will be a sister ship to the DHT Antelope and DHT Addax, both delivered from Hanwha Ocean earlier this year. The DHT Oryx will feature large carrying capacity and will come equipped with an exhaust gas cleaning system. We secured a new $250 million reducing revolving credit facility. All the banks in our banking universe participated, and it's fair to add that it was meaningfully oversubscribed. The facility has a seven-year tenure, a 20-year repayment profile, and is priced at 135 basis points above SOFR. Additionally, it has an uncommitted accordion feature of $250 million.

Moving to events subsequent to the quarter. First, we secured a three-year time charter at $75,000 per day with a global energy company for the 2015-built DHT Jaguar, which is scheduled to deliver into the contract this September. Second, in line with our strategy to divest all the tonnage, we finalized the sale of the 2007-built DHT Bauhinia, delivering her to the new owner in July. This transaction generated $51 million in total cash proceeds and a net capital gain of $34 million. Lastly, in July, we took delivery of the DHT Impala from Hyundai. This represents the fourth and final new building in our 2026 fleet program. Referring to our prior disclosures, the vessel was successfully delivered with the intended design upgrades completed. Back to you, Laila. Thank you.

In line with our cash allocation policy of paying out 100% of ordinary net income at quarterly cash dividends, the board has approved a dividend of $1.22 per share for the second quarter of 2026. This marks our 66th consecutive quarterly cash dividend. The shares will trade ex-dividend on August 17th, and the dividend will be paid on August 24th to shareholders of record as of August 17th. Here we also present our estimated P&L and cash breakeven levels for the second half of 2026. Our P&L breakeven for the period is estimated at $29,700 per day, while our cash breakeven is estimated at $22,600 per day, which reflects all true cash costs. The difference between our P&L and cash breakeven is now estimated at $7,100 per day. This discretionary cash flow will remain within the company and be allocated for general corporate purposes.

On this slide, we present an update on bookings to date for the third quarter of 2026. We expect 1,020 time charter days covered for the third quarter at an average rate of $75,900 per day. This rate includes profit sharing for the month of July and the base rate only for the months of August and September for contracts with a profit-sharing feature. We also anticipate 1,029 spot days for the quarter, of which 58% or 600 days have been booked at an average rate of $152,700 per day. The spot P&L breakeven for the quarter is estimated to be less than zero, as the time charter earnings are expected to exceed forecasted costs. Turning to our 2026 dry dock schedule. As shown on this slide, we have seven vessels due for dry docking during the year.

DHT Lion completed its dry dock in the first quarter, while DHT Amazon, DHT Osprey, and DHT Puma completed their dry docks in the second quarter. DHT Panther completed its dry dock earlier this week, all planned dry docks were completed on time and within our expectations. Looking at the remainder of the program, two vessels, DHT Harrier and DHT Redwood, are scheduled to undergo their second and third special survey and dry docks respectively during the second half of 2026. Upon completion of these surveys, we will have completed this year's dry dock program and enter 2027 with only four vessels scheduled for dry dock during next year, providing a rather light maintenance schedule from an operational and commercial perspective. Now I'll turn the call back to Svein.

Thanks, Laila. We will now turn to current market dynamics, where several structural forces are shaping the tanker landscape. Geopolitical friction and risk premiums. Middle East hostilities continue to force vessel rerouting, expanding ton-mile demand, and squeezing overall fleet efficiency. While most operators, including DHT, avoid high-risk zones, operators willing to venture into the Persian Gulf are extracting substantial risk premiums. Structural supply consolidation. Spot supply remains tightly constrained following major fleet consolidation by a private aggregator earlier this year, which has reduced fragmented spot capacity. Asset price floor. Second-hand asset values continue to see strong institutional support underpinned by acquisitions by a Middle Eastern national energy company at premium valuations. In China's shock absorber strategy, China temporarily blunted global oil price spikes by drawing on its strategic and commercial crude stockpiles while curbing refined product export quotas.

Once this destocking cycle runs its course, we expect a sharp rebound in China's seaborne crude import demand. Looking ahead, we see two primary structural catalysts driving market fundamentals. First, resolution versus continuation of regional conflict. If resolved, an operational mechanism for conflict resolution should normalize Iranian crude flows into compliant trade channels. This would shift transport volumes away from the non-compliant shadow fleet to independent compliant operators like DHT, substantially expanding our addressable markets. If unresolved, long-haul crude routes will persist. While the shadow fleet may continue trading, its need for vessel replacements will support second-hand asset values and ultimately force the retirement of the fleet's oldest tonnage. Secondly, energy security and strategic reserve replenishment. Heightened global focus on energy security will necessitate a massive rebuilding of depleted national strategic and commercial inventories. This replenishment cycle will generate sustained transportation demand well beyond baseline daily crude consumption.