DHT Holdings – DHT

Source: https://www.bimco.org/news/market_analysis/2021/20210903-tanker-shipping—profitability-still-a-way-off-for-loss-making-tankers-as-pandemic-drags-on


According to BIMCO estimates, a standard VLCC must earn around USD 25,000 per day to break even. The last time average VLCC earnings were above this level was at the end of December 2020. Earnings for Suezmax and Aframax tankers stood at USD 9,194 and USD 8,367 per day, respectively, on 3 September.

In terms of demand for seaborne transportation of oil products, volumes have risen by 22.4% in the first six months of this year compared to 2020, but at 508.2m tonnes, volumes are, however, 13.4% lower than in the first half of 2019. Out of the major oil products, the largest increase in volumes compared with last year and smallest decrease compared to 2019 has been registered for gasoline, which is down 6.4% after the first six months of 2021 compared with pre-pandemic levels. In the same period, gasoline volumes have risen 35.9% compared with the first half of 2020

Despite crude oil tankers faring even worse in terms of earnings than their oil product counterparts, crude oil tankers have largely avoided demolition. So far this year, only 3.2m DWT of actively trading crude oil tankers have been demolished, exceeding the figure for product tankers. However, given that the crude oil tanker fleet is more than 2.5 times larger than the oil product fleet, these demolitions represent a much smaller part of the fleet being removed. BIMCO expects 5m DWT of crude oil tankers to be demolished in 2021, an increase from 2.7m DWT last year, but still much lower than current freight rates could suggest.

On the ordering front, new contracts for oil product tankers have totalled 4.1m DWT this year with a further 14.5m DWT of crude oil tankers being ordered.

Just as global demand for oil is currently below its pre-pandemic levels, demand for shipping is on the decline because the stocks that were built up over the summer last year are now being used. In fact, US crude oil stocks are currently at their lowest level since January 2015, at 1,053 million barrels, down from their peak in June 2020, when they reached 1,195 million barrels. Lower stocks and rising demand indicate that either the US will have to start producing more crude oil or look to increase imports, a scenario that would be beneficial for the shipping industry. The US has been a leading voice in calls for OPEC to increase production as crude oil prices have risen.

As the northern winter approaches, which is traditionally tanker shipping’s strong season, demand will remain subdued, with little hope of tankers achieving profitable freight rates on open trades this year, unless seasonal issues can stimulate underlying demand to boost earnings. As demand is forecast to exceed 2019 levels in 2022, the outlook for tanker shipping is better next year. That said, better and good are not always the same thing and profitable rates may not be a reality until the second half of 2022.

source: https://www.hellenicshippingnews.com/tanker-orderbook-remains-restricted-despite-pace-of-newbuilding-orders-and-few-demolitions/

ust over 150 confirmed tanker orders (over 25,000 dwt) have been placed so far in 2021, compared to nearly 165 confirmed orders for 2020. Nearly half of the orders are in the MR segment (40-55,000 dwt), with ordering activity in this size already exceeding last year’s level. The number of VLCC and Aframaxes/LR2s orders so far in 2021 is just below last year’s level, with investment in new VLCCs being particularly high during Q1. Suezmaxes are the exception to the overall trend, with 15 orders placed since January, less than half of the 2020 number.

The latest increases in newbuilding prices may discourage some investment but what are the chances that we are going to see much lower values anytime soon? Intense ordering activity in other shipping segments means that yards are under no pressure to reduce their prices in the short term. Steel prices may continue to be supported by robust demand from the construction and manufacturing sectors powered by various fiscal stimulus programs designed to aid the recovery from the pandemic, while governments are also under little pressure to ease inflationary concerns”.

“While the orderbook is healthy, the existing fleet continues to age. Depending on the segment, between 20% to 30% of the fleet is over 15 years old and will be approaching their natural “retirement” age over the next few years.

And last but certainly not least, the regulatory and environmental pressure has never been higher and will undoubtedly continue to increase going forward. As ageing tankers on average consume around 20-25% more bunker fuel than the latest designs.

DHT Holdings’ (DHT) Management on Q4 2021 Results – Earnings Call Transcript

source: https://seekingalpha.com/article/4485119-dht-holdings-dht-management-on-q4-2021-results-earnings-call-transcript

Best quotes

DHT continues to show a healthy and strong balance sheet and the quarter ended with $60.7 million of cash. At quarter end, the company’s availability under both revolving credit facilities was $178.7 million, putting total liquidity at $239 million as of December 31st. Financial leverage is about 30% based on market values for the ships and net debt per vessel was $17.8 million at quarter end, which is well below current scrap values. Looking at the P&L highlights. EBITDA for the fourth quarter was $32 million and net loss came in at $2.9 million. We believe this is a very competitive result given the current tanker market. The results includes the cash distribution of equity of $4.6 million from the Mutual War Risk club and a non-cash gain in fair value related to interest rate derivatives of $4.5 million.

he number we want you to remember from this slide is that our spot ships only need to generate $10,900 per day in 2022 in order for DHT to be cash neutral. You should recognize this as a sharp and very competitive number. And we can inform you that even in a dreadful current market, our spot ships are making more than this. As Laila said, first quarter spot bookings to date stand at 59% of available days booked at over $12,600 a day. So we dare to state that if you generate cash in this market, you have protected you downside very well.

As an example, if we were to see $50,000 a day average spot rates for the year, we stand to generate $287 million in free cash flow, which equates to $1.70 per share. You should also note that a $5,000 a day change in spot rates equaled some $38 million in annual cash flow, equivalent to almost a quarter a share.

Before we open up for your questions, let me also add some brief comments about my retirement that was announced a couple of weeks ago. When Svein and I decided to team up just after the great financial crisis of 2008, it was with a desire to build a ship-owning company that was doing all the right things, namely, investing countercyclically, building a balance sheet suitable for the business and staying disciplined through the cycles. DHT became our platform and I’m very proud of how we have been able to transform what was a small tonnage provider to the sizable and highly regarded VLCC owner we are today. We have done it together with a small group of talented and dedicated shipping professionals without whom it just couldn’t have happened. The company is in excellent shape with a great fleet, strong balance sheet and a terrific team, both ashore and the older ships. So why in the world would I want to step down from this?

A good question indeed, but the simple reason is that I’ve always wanted to retire in time to be able to enjoy and pursue my many hobbies while still young and strong. It really is as simple as that. I feel that all of us at DHT have accomplished what Svein and I set out to do some 13 years ago, and it doesn’t stop here. I’m convinced the future holds great things for DHT. I’m very proud of what the DHT has become, and I’m totally confident Svein and the team will continue to do the right things and skillfully navigate the DHT shift through the coming tanker market cycles.

Q: So with demand on the rise, inventory levels at eight-year lows. OPEC gradually increasing supply, what is keeping such a maybe tight lid on rates? And when do you expect to see an inflection higher?

A: I think all things you mentioned, Randy, is right in the oil market, and we recognize these things moving ahead. And eventually, it will be in a strong favor of the tanker market. The short answer in the short-term is that there’s just way too many ships in the market. So one, you have a big sort of most fleet satisfying a demand for transportation from sanctioned barrels. And secondly, you have had hardly any scrapping or retirement of ships. So we’re now close to, I think, 27%, 28% of the fleet older than 15 years, and we are between 11% and 12% of the fleet older than 20 years. There will be some 35 ships this year turning 20.

And far from all these ships have been through dry docks or installed ballast water treatment systems, et cetera, and scrap prices are high. So I think all logics sort of leads you to scrapping will have to start at some point. And that’s really the short-term pain here is that there is too many ships in the market.

And as you rightly noted, our balance sheet today is very strong. In fact, it’s the strongest amongst all the peers.

Well, I want to thank you very much for that approach. I’d like to mention to you something that I’ve observed in the market, a company called ZIM Integrated Shipping, which has virtually no debt. And I have seen within the last 52 weeks of trading, the stock has gone from a low of 15 to where it’s currently trading at around $72 a share.

source: https://finance.yahoo.com/quote/ZIM/

The Iranian VLCC fleet, if I’m not wrong count 38 vessels and the average age of that fleet is, I think, 17.5 years. So it’s not a young and efficient fleet. And many of these ships are used to store oil floating of Iran as a buffer.

source: https://finviz.com/