DHT Holdings, Inc. (NYSE:DHT), a leader in the crude oil transportation industry, reported a successful Q4 2023 with revenues reaching $94.5 million and net income at $35.3 million. The company, known for its robust balance sheet and low leverage, revealed a net income of $161.4 million for the entire year. In the earnings call, DHT Holdings expressed its strategy to explore growth opportunities through investments in newbuilds, secondhand vessels, and potential mergers and acquisitions (M&A). The company also reaffirmed its commitment to returning 100% of ordinary net income to shareholders as quarterly cash dividends.
Key Takeaways
- Q4 2023 revenues hit $94.5 million; net income stands at $35.3 million.
- Annual net income for 2023 reported at $161.4 million.
- The company maintains a strong balance sheet with significant liquidity and low leverage.
- DHT Holdings is exploring growth through newbuilds, secondhand vessels, and M&A.
- The tanker industry is expected to see slow changes with current propulsion systems prevailing.
- The company is committed to paying out all ordinary net income as quarterly cash dividends.
Company Outlook
- DHT Holdings is considering increasing leverage to approximately 30% for investment purposes.
- The company is actively looking for investment opportunities to develop and expand the business.
- They are monitoring the market for potential dislocations that may justify investments in older ships.
Bearish Highlights
- Market tightness and geopolitical factors create reluctance among ship owners to travel to certain areas.
- The impact of the Red Sea issue on the VLCC market is minimal, but it could lead to higher transportation costs for smaller ships.
Bullish Highlights
- Signs of improvement in the global economy could positively influence the freight market.
- The company's earnings for AG East are now comparable to the US Gulf Far East trade.
- Modern ships are earning in the low to mid-50s for straight-run business, indicating a favorable market trend.
Misses
- There was no mention of specific misses in the earnings call summary provided.
Q&A Highlights
- The company has a clear dividend policy, which is to pay out 100% of net income while building cash reserves.
- DHT Holdings does not plan to remain inactive for the next six years, as it would lead to a reduction in fleet size and operational capability.
- The company is focused on achieving good fuel economics and is open to accessing time charters in the future.
In conclusion, DHT Holdings has demonstrated financial resilience and a strategic focus on growth and shareholder returns. The company's outlook remains cautiously optimistic as it navigates market challenges and seeks to capitalize on potential opportunities in the evolving tanker industry.
InvestingPro Insights
DHT Holdings, Inc. has shown a robust financial performance in the last quarter of 2023, and the company's strategic maneuvers are reflected in real-time data and expert analysis. Let’s delve into some key insights from InvestingPro that could influence the company's future performance and investor decisions.
InvestingPro Data indicates that DHT Holdings boasts a market capitalization of $1.73 billion, with a healthy price-to-earnings (P/E) ratio of 9.27, which further improves to 8.29 when adjusted for the last twelve months as of Q3 2023. This suggests that the company is valued favorably compared to its earnings. Additionally, the impressive revenue growth of 56.94% over the last twelve months signals strong business performance.
In terms of profitability and financial health, DHT maintains a high gross profit margin of 59.59%, and their operating income margin stands at a solid 39.02%. These figures underscore the company's efficiency in managing its operations and profitability.
Supporting the article's mention of DHT's commitment to shareholder returns, one of the InvestingPro Tips highlights that the company has upheld dividend payments for 16 consecutive years, with a notable dividend yield of 7.23% as of the data available. This consistent return to shareholders aligns with the company's policy of paying out 100% of net income as dividends.
Furthermore, an InvestingPro Tip points out that management has been aggressively buying back shares, which can be seen as a signal of confidence in the company's value and future prospects. This aligns with the company's strong balance sheet and low leverage, as mentioned in the article, and could be a factor in driving future growth.
For investors looking to gain deeper insights and additional tips on DHT Holdings, Inc., InvestingPro offers a comprehensive set of data and analysis. There are 11 more InvestingPro Tips available for DHT, which can be accessed by visiting https://www.investing.com/pro/DHT. To enhance your investing strategy with these expert tips, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
These InvestingPro Insights can help investors better understand DHT Holdings' market position and potential, as the company continues to explore growth opportunities and prioritize shareholder returns amidst a challenging yet improving global economic landscape.
Full transcript - DHT Holdings Inc (DHT) Q4 2023:
Operator: Good day, and thank you for standing by. Welcome to the Q4 2023 DHT Holdings, Inc. Earnings Conference Call. At this time, all participatns are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that 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.
Laila Halvorsen: Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings fourth quarter 2023 earnings 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 on our website, dhtankers.com until February 14. 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 reports. Actual results may differ materially from 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. We maintain a very strong balance sheet represented by low leverage and significant liquidity. At year-end, financial leverage was below 20% based on market values for the ships and net debt was below $15 million per vessel. The fourth quarter ended with total liquidity of $268 million, consisting of $75 million in cash and $193 million available under our revolving credit facility. Now, over to the P&L highlights for the quarter. We achieved revenues on TCE basis of $94.5 million and EBITDA of $73 million. Net income came in at $35.3 million, equal to $0.22 per share. We continue to show good cost control and operating expenses for the quarter were $18.7 million and G&A was $4 million. The vessels in the spot market earned $43,600 per day, and the vessels on time charters made $39,600 per day and this includes profit sharing for two of the five vessels on time charters. The average TCE achieved for the quarter was $42,800 per day. 2023 was the second best year in the company's history with net income of $161.4 million, equal to $0.99 per share. We achieved revenues on a TCE basis of $390 million and EBITDA of $302 million. Average TCE for 2023 was $47.5 million -- I'm sorry, $47,500 per day, where the vessels in the spot market earned $51,200 per day and the vessels on time charters made $36,400 per day. On this slide, we present the cash flow highlights. We started the fourth quarter with $74 million in cash, and we generated $73 million in EBITDA. Ordinary debt repayment and cash interest amounted to $16 million and $30.6 million was allocated to shareholders through the cash dividend pertaining to the third quarter of 2023, while $2.2 million was used for maintenance CapEx. We prepaid all installments for 2024 under the Nordea credit facility amounting to $23.7 million, and we drew down $24 million on our debt which was subsequently repaid in January '24. $23 million was related to changes in working capital and the quarter ended with $74.7 million in cash. Switching to capital allocation. In line with our dividend policy, we will pay $0.22 per share as a quarterly cash dividend, which is equal to 100% of ordinary net income. The dividend will be payable on February 28 to shareholders of record as of February 21st. This marks the 56th consecutive quarterly cash dividend and the shares will trade ex-dividend from February 20th. Total cash dividend for the full year equals $0.99 per share and below is an illustration of the quarterly cash dividends we have returned to shareholders since we updated the dividend policy in the second half of '22. This amounts to a total of $1.41 per share. We have shown a robust spot earnings during 2023 with quarterly average rates ranging from $43,600 up to $64,800 per day. Average spot earnings from Q4 '22 through Q4 '23 was $53,700 per day, which compares well with the average TD3c index for the same period of $40,100 per day or the 25-year average spot rate reported by Clarksons of $41,400 per day. Outlook for DHT spot rate for Q1 ‘24 shows $55,900 per day booked to date. On the left side of this slide, we present an update on estimated P&L and cash breakeven rates for 2024. P&L breakeven is estimated to $27,400 per day for the fleet, while cash breakeven is estimated to $18,500 per day, resulting in $8,900 per day per ship in discretionary cash flow after dividends. So assuming the vessels are in P&L breakeven, this means about $76 million in discretionary cash flow for the year. On the right side of the slide, we illustrate estimated earnings per share for 2024 based on different rate scenarios. Assuming $50,000 per day, earnings per share will be $1.04, while $75,000 per day estimates $1.85 and a spot rate of $100,000 per day estimates $2.65 in earnings per share. We will now go through the first quarter outlook. We expect 455 days to be covered by our time charter contracts at an average rate of $36,600 per day. This includes reported profit sharing for January and February for two of the five vessels on time charters, while March only assumes base rate. Further, we expect to have a total of 1,630 spot days for the quarter, of which 1,270 days equals to 78% have been booked at an average rate of $55,900 per day. As of today, this suggests combined bookings of 83% of the total days at an average rate of $50,800 per day. You can compare these spot bookings numbers with the estimated spot P&L breakeven rate of $25,900 per day for the first quarter, allowing you to model a net income contribution based on your own assumptions for the unfixed spot days. With that, I will turn the call over to Svein.
Svein Moxnes Harfjeld: Thank you, Laila. On this slide, we wanted to discuss the fleet development and its demographics. On the graph to the left, we illustrate with blue line the average historical age of the VLCC fleet since 1996. As you will see, the average age in the '90s were above 13 years. As the double-haul concept evolved in response to the planned phaseout of single haul tankers, the fleet age reduced to about eight at the beginning of the 2000. It further reduced to some seven years following the extensive deliveries between 2007 and 2012. Fleet renewal stagnated, however, despite the meaningful number of ships being delivered once the eco designs came to the market in 2015. Today, the average age of the VLCC fleet is 11.5 years. In stark contrast with this development, general fleet renewal has abated, resulting in the current order book standing at 2.5%. Looking at the graph to the right, we illustrate anticipated fleet over the next three years. We assume no scrapping as this has been nonexistent in the recent past. If you look to end 2026, the fleet that will be older than 20 years or reach 200 ships, a big number. However, looking at how many ships will be older than 15 years of age by the end 2026, the number is huge. We will in this scenario reach 445 vessels, equal to almost 50% of the fleet. On this slide, we continue the same theme. And apologies if this comes across as repetitive. The graph to the left points out how ordering on new VLCCs more or less came to a halt in the first half of 2021. Three years later, we have seen some activity pick up, but the order book is, as we said, still only 2.5%. The graph to the right shows the number of ships scheduled for delivery over the coming five years against ships turning 20 or 25 years. And for all practical purposes, 2026 delivery is now sold out. Shipyards are offering 2027 deliveries. However, in strong competition with other ship types such as LNGs, LPGs, ammonia carriers, container carriers and large bulk carriers. Even a significant effort to contract new ships will struggle to put a dent in this highly constructive supply picture. The CII regime will likely result in part of the fleet having to slow down to stay in business, thereby reducing capacity further. There are likely numerous reasons why the order book has ended up where it is. We suggest uncertainty related to future fuels to be one. Further, many shipowners have alternative investment opportunities and not only in other sectors in shipping. We see many private companies with meaningful capital being allocated to family offices, private equity and real estate. This slide presents research from well-regarded Rystad Energy. It depicts the prospective uptake for either ammonia or methanol as fuel in different shipping sectors. These two fuels are likely not the only alternatives we will see in the future, but they seem to be the most talked about. Following a deep dive into this interesting issue, they have mapped out construction of potential future production facilities, the expected cost of these fuels, how and where these fuels can be delivered to the market, and lastly, are there any other industries or sectors than our own that have a willingness or ability to pay a higher price. Additional aspects include consideration of energy density and how that can be solved here under bunker capacity on board ships and whether that will result in redesigns that make ships larger or having to reduce carrying capacity, all a very complex picture. These two graphs looks out to 2014 and suggests tankers, hereby illustrated by the green lines, will have a slow uptake or changeover. We might see uptake in LNG as a transitionary fuel and biofuels being blended into conventional products, but current propulsion systems looks set to have many more years in business. This slide is a familiar picture. Energy Aspects, another highly respected firm, has laid out a dislocation between where future crude oil supply will come from and where it will be consumed. No surprises here, but nevertheless interesting as analysis has a detailed bottom-up approach. The key takeaway is, as we have stated many times over, the Atlantic is long crude oil and the demand growth is in Asia. This will be carried on ships and the majority most likely on the industry workhorse, VLCCs currently carrying almost 50% of all seaborne crude oil. Within all the geopolitical noise, we should not forget to consider the fundamentals supporting our business. Continued growth in oil demand, longer transportation distances and hardly any new shipping capacity coming to market against the rapidly aging fleets. We are staying focused on what is within our control, concentrating on disciplined execution of our strategy and maintaining what we have been told is a highly regarded level of corporate governance. We believe our company is well structured for cyclical and volatile markets with our solid balance sheet and a strong liquidity at its foundation. As always, we keep our eyes on maintaining robust cash breakeven levels while still having meaningful market exposure and operating leverage being as profitable as we can, all the above with a defined and shareholder-friendly capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends. And with that, operator, over to you.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question from the line of Frode Morkedal from Clarksons Securities. Please go ahead.
Frode Morkedal: Thank you. Hi, Svein and Laila.
Svein Moxnes Harfjeld: Hello, Frode.
Frode Morkedal: Very interesting slides you had there on the supply and demand picture. So how do you see investments given that backdrop? You mentioned growing interest in newbuild, but still low numbers. And the fleet is rapidly aging, right? So would you consider investing in newbuilds or secondhand vessels today?
Svein Moxnes Harfjeld: DHT today already has got significant exposure to the market, and we feel we are very well positioned to sort of harvest a very interesting period ahead of us. That being said, we are, of course, turning every stone to look at opportunities that can create value for our shareholders and increase earnings per share accordingly. And that includes also aspects of potential growth, it's looking at secondhand vessels, we're looking at M&A and of course, also looking at new buildings. And if we decide to do something, we will, of course, notify the market once that is considered a firm business.
Frode Morkedal: Sure. And if I may ask, what kind of financial leverage ratios do you prefer now? Well, you have very low loan-to-values of 20%. Do you tend to keep it relatively low leveraged or could you increase it? Let's say, I guess, in order to keep up the 100% of earnings per share and dividend, there's definitely room to increase debt, maybe debt amortization up to, let's say, depreciation could be a target. What do you think?
Svein Moxnes Harfjeld: So our balance sheet today has a meaningful capacity to invest. So -- and we hope to find the right opportunities to expand the company with the right transactions. And in that regard, we will use the balance sheet and lever up a bit. So leverage today, mark-to-market is just shy of 20%. I think another sort of good reference on this is that on the book value, we only have 28%. So we could sort of move leverage on the mark-to-market, say, comfortably to around the 30% mark and this will not impair the dividend capacity and so the earnings per share. So -- and that's very important for us is that anything we do has to be accretive to earnings per share and not really distort the commitment to pay out 100% of net income.
Frode Morkedal: Good to hear. Thank you. That’s it for me.
Svein Moxnes Harfjeld: Thank you, Frode.
Operator: Thank you. We will now take our next question. And this is from the line of Jon Chappell from Evercore. Please go ahead.
Jon Chappell: Thank you. Good afternoon. Just a quick housekeeping one first. If I look at the first quarter spot days expected, it looks like it's maybe 80 short of what the spot fleet times the number of days in the quarter would be. So maybe just for the full year, is there a drydocking schedule or a number of off-hire days scheduled for every quarter this year that we could know at this point?
Svein Moxnes Harfjeld: We are, in general, very light on drydocks this year, but there are some drydocking days in the first quarter. So our sort of older ships will -- 3 of them will go into drydock and have service really in the first half. And some of those days are in the first quarter.
Jon Chappell: Okay. And then nothing really in the second half of the year?
Svein Moxnes Harfjeld: Yeah, that's correct. So I think we -- yeah, that's correct. And we have one shift if my correction is correct next year. So...
Jon Chappell: One next year. Okay. Great. And then Svein, just kind of bigger picture, I think we spoke about this last call maybe. There's a lot of volatility in the smaller-sized ships for many of the geopolitical reasons that you spoke to or that we already know about. The Vs have done well, but they certainly haven't done quite to the extent that maybe the smaller crude or even the bigger product tankers have. What do you think it's going to take for the VLCCs to kind of show some of the upside volatility maybe of some of the others? Is it strictly reliant on OPEC increasing production again? Is it maybe cannibalization of some of the strength in the Aframax and Suezmax markets or is there something even beyond that?
Svein Moxnes Harfjeld: It’s probably several things, right? We do sense and hear that there is some increasing level of fatigue in being able to receive and transport in sort of the [more shadowy] (ph) market, so to say. And it creates challenges for receivers to plan logistics, efficient port utilization and all of this. So -- and it also costs more. And we see now there's -- I think we understand there's some 10, 12 ships storing sanctioned crude in Southeast Asia that has been unsuccessful to deliver those crudes to end users because of payment problems. So I think all these sanctioned activity is sort of slowly starting to bite. And then, of course, people will start to increasingly look at energy security and more sort of compliant and reliant supply chain. So that, I think, will evolve, but this is not happening overnight. But just taking a step back, if you look at our earnings last year, it's a pretty healthy number. And although this historically has been the most volatile them all, now certainly we are not. And we're quite, quite stable and giving a sort of very, I think, good prospects going forward. We have a sense now that some of the biggest refineries in the far east, maybe in China in particular, are drawing on inventories. So there is a sort of imbalance now, and this has to be fixed. And this is likely a first half event, whether this is just after Chinese New Year or May or June, I don't know. But where there will be more oil coming to market as inventory levels are likely to at a quite low level. And you also see, at the same time, signs that the economy is looking more promising than it has done for quite a while. And there are sort of small drips of good news coming along the way. So there might not be one big dramatic event that changes the game, but there will be a tipping point where suddenly these things move. And I think then the big ships will stand to be well rewarded.
Jon Chappell: Great. I appreciate it. Thank you, Svein.
Operator: Thank you. We'll now take our next question. And this is from the line of Omar Nokta from Jefferies. Please go ahead.
Omar Nokta: Thank you. Hi, Svein. Hi, Laila. Just wanted to follow up on Jon's question, just kind of about the market as it is. And for VLCC specifically, we've seen the Red Sea has been an issue now for a few months now, but really over the past few weeks, we started to see the acceleration of tankers diverting. And obviously, that's been much more of a midsized situation, not necessarily the VLCCs, but just wanted to get sort of your perspective on how do you think this all starts to play out for VLCCs in the near term? Obviously, who knows how long the diversions will last for. But just based off of what we're seeing in the market today with the ships that are now transitioning away for longer, how do you see that eventually impacting the VLCCs?
Svein Moxnes Harfjeld: The Red Sea issue has had a fairly limited impact on the VLCC business. So if the issue is being removed, it also have a limited impact. But it looks like it will stay on for little while, and I think it will incrementally or exponentially, rather, increase transportation costs for smaller ships going around and thereby making the bigger ships more and more favorable. So that could sort of be something that plays out. But I think in the actual freight market, as I said, the Red Sea issue has had very limited impact. It has maybe had a bigger impact in the stock market and how people try to trade the event and the noise and are there more missiles hitting ships? Or is there some peace talks being negotiated or whatnot, it is influencing the capital markets. But the underlying business is relatively stable, although I would say right now, as we speak, the freight market is moving up. So especially cargoes out of Middle East, the list of ships are now very tight, and you have owners that have been a bit reluctant to go to the area in general. So this has maybe impacted by the ship lists are shorter. So now AG East is on par with the US Gulf Far East trade essentially. So modern ships are earning now in the low mid-50s for sort of straight-run business. And I would be surprised if this not has got more legs in the imminent future.
Operator: Thank you. [Operator Instructions] We'll now take our next question. Next question is from the line of Robert Silvera from R.E. Silvera & Associates Marine Surveyors. Please go ahead.
Robert Silvera: Yes. Thank you for taking my call. I'd like to look at the optics of the dividend. Your net earnings, of course, earnings per share, $0.22 and you're generously giving us the $0.22. That optic and the optic of shipowners not contracting for many new ships says that this is a cash cow business with not a great future. I personally, in my company, think that, that is a big mistake. Oil is going to be around and the need to ship it on oceans is going to be around for a very long time. We, from our perspective, would love to see you when you come up with a $0.22 dividend, retain approximately 10% and keep it at $0.20, saving that $0.02 to build cash. We don't know what the future holds. Obviously, the world can be quite unstable at times. And usually, when that takes place, cash is king for one reason or another. So we would love to see you on a proportion like you're $0.22 this time instead just issued $0.20, keep the $0.02 and keep showing the market that you really believe in the future and that you're building your cash so that we're not working for banks when an emergency comes, but rather we are getting more and more cash rich as time goes on. That's the first part of my question.
Svein Moxnes Harfjeld: Thank you for sharing your views. So we are already building cash, but still being able to retain the 100% of net income as a dividend because the cash breakeven is, as Laila talked about for 2024, is $8,900 per day lower than the P&L breakeven, which is a threshold for dividends. So -- and this is because depreciation is higher than amortization. So we are building cash without sort of having to be making smaller adjustments to the dividend. And I think there is some merit in having a very clear and well-defined dividend policy that people understand that this fixed percentage of net income, it will allow the investors, although we are in a market where earnings vary, it's very clear what they will get out of the business without impairing the balance sheet of the company or reducing our ability really to be able to invest. So we are committed to the current policy, and that is what you should expect going forward.
Robert Silvera: Okay. Well, for me, from my -- our standpoint, it's kind of an optics thing. If you look at 2022, your cash and cash equivalents at the end of the year were $125 -- $126 million. At the end of this year, you're down to $75 million, approximately. So overall, year-over-year, your cash is dropping. I...
Svein Moxnes Harfjeld: No, that’s -- excuse me for interrupting you for a moment there, but -- you have to -- you're forgetting that we made an investment last summer in a five year old ship of $94.5 million. And we did this without issuing any new equity and that was cash reserves that were built up despite paying out 100% of net income, and that was accretive to earnings immediately for all the shareholders. So that's where the sort of difference in cash position is reflected.
Robert Silvera: Okay. I accept that.
Svein Moxnes Harfjeld: Thank you.
Robert Silvera: The other thing that troubles us is you had, a couple of years ago, pledged you were going to aggressively lower debt. And I remember the days when you were around $900 million. And of course, you are down considerably to that now to $354 million in debt, but it's up from 2022 where it was $271 million. We would just like to see you come off optically I'm saying, as if this business has a very long-term future that's going to grow and significantly reward as you have in the past. Don't get me wrong. I think you guys have done a great job, and we're very happy as shareholders for years now. But it's an optical thing. And apparently, the shipowners, in general, they're not placing orders for new tankers. So the industry seems to be looking at it -- at its future as if, well, oil is going to disappear. And I think we both agree that that's real, that’s not realistic at all. So we would just like to see you continue on that path of significantly pointing out the reduction of debt and the idea of keeping -- like I said, keeping a little bit back, not more than 10% of what you could pay as a dividend according to the way you're going now. And this shows that we see the future brightly, and we're reserving cash, we're strengthening our balance sheet even more rapidly than the rate in which you're doing it now. That's where we're coming from, and it's an optics thing. We're very happy, and we thank you very much, Svein and [indiscernible] doing such a great job.
Svein Moxnes Harfjeld: Thank you very much for your kind words. We appreciate you sharing your thoughts with us. Thank you.
Robert Silvera: God bless you.
Operator: Thank you. We'll now take our next question. This is from the line of Omar Nokta from Jefferies. Please go ahead.
Omar Nokta: Hi, thank you. Hi, Svein. Just wanted to put myself back in the queue. I had maybe two more follow ups. Just one back to -- sorry to bring it back to the Red Sea. I did want to ask, because you mentioned that it hasn't been much of an impact for VLCCs. But just in general, is there -- do you think there's maybe perhaps like a backdoor way that VLCCs benefit from this just in terms of Suezmaxes and Aframaxes that would normally be competing against the LCCs in, say, the Middle East market? Those are now diverting and thus not as able to compete going forward. Is that something or is there just not enough of a competition from them in the first place for it to really matter?
Svein Moxnes Harfjeld: I think if the situation stays on for a good while, that will happen. So in the short term, of course, people are sort of scrambling just to fix the immediate problem and getting the oil delivered as quickly as they can. But the cost of bringing sort of Suezmax and not talking about an Aframax around South Africa to avoid the canal compared to doing a big ship is significant. So if this stays on for a little while longer, then people will increasingly move those barrels into bigger ships, we think. So you're right in your sort of, I guess, loaded question that VLCCs will stand to benefit from this, if this carries on for a while.
Omar Nokta: Okay. Thank you. And then just one quick one on the fleet sort of acquisitions and that type of thing. The -- clearly, the fleet you mentioned is aging rapidly. There's not a lot of capacity coming on until '27. Asset values have risen materially and I know it makes it difficult to get deals done, although the one you mentioned last year was -- looked like a good price at a good time. What do you think about going older in this environment? Does it make sense to look out for ships in that 10-plus year range, going down a bit on the age range, perhaps getting a better ROE potential in this market?
Svein Moxnes Harfjeld: Yeah. Of course, you employ less cash on all the ships, obviously. There is a meaningful earnings differential between the ships that were built after '15 given the eco designs and there are sort of older siblings. So you need to sort of reflect that into your investment calculation. I think there are a number of customers that will have to be more dynamic in looking at age of ships. Operating costs are a bit higher. So a lot of details here, not just a sort of a headline number and do a quick one on the 12 seats. So we are, of course, running numbers on everything, but I think it's important that we do get good fuel economics in all the ships, also relates to sort of CII trajectory, it relates to access to time charters in due course if that wants to -- if that’s something we want to have in the portfolio. So it's not sort of a simple fix to do that. But of course, we keep a keen eye on all these things. And if the dislocation is bigger than it is now, maybe you have to look at that. But I don't think it's sufficient to justify going older versus going younger, although the nominal number is higher on the younger end.
Omar Nokta: Got it. Understood. Fine. Thank you. That's very clear. I'll turn it over.
Svein Moxnes Harfjeld: Okay. Thank you, Omar.
Operator: Thank you. We'll now take our next question. Please stand by. Next question is from the line of Stefano Grasso from 8VantEdge. Please go ahead.
Stefano Grasso: Hello, hi, Svein and team. Congratulations on the quarter. Just to follow up on the capital allocation. It looks like we're going to have two, three years with no deliveries and the supply/demand tightening up as we go along. Of course, we can't predict what -- who is going to order what, but let's say that at some point, some vessels are going to be ordered, it will still take like two, three years at the minimum for these deliveries to have an impact and kind of rebalance the market [Technical Difficulty] cycle, that's probably out six-plus years. Is that plausible for DHT to basically do nothing for six-plus year, kind of get the cash flow from the fleet and wait for that bust further out to happen and then in the typical style of DHT, take advantage of that market and get longer gain vessels?
Svein Moxnes Harfjeld: Yeah. It's a good question. Of course, it's possible, but it will sort of involve having a different strategic take on how to run the business because today, our fleet is just shy of 10 years, about 10 years old on average. And if you look six years out, it becomes 16 and the company will shrink quite meaningfully and we might be debt-free, but we will have much less ability to do things than what we do today. So I think if a strategy like that at all were to be contemplated, it would be more sort of running the business out in totality and pay out all the money and then close shop at some point. But that is not in the cards. So -- and we believe it will be possible to do things, to invest for the company and do good things for the company. And we have our sort of eyes on that. So hopefully, we can uncover the right opportunity and put that to bed and continue to develop the company. So I think it's a bit in our current format and strategy, it's unrealistic. And I think some of our key customers will also potentially not be as supportive as they are today. So...
Stefano Grasso: Yeah. Thank you.
Svein Moxnes Harfjeld: Thank you.
Operator: Thank you. [Operator Instructions] There are no further questions at this time. I will hand back to the speakers for any closing remarks. Thank you.
Svein Moxnes Harfjeld: Well, thank you very much to all for listening in on DHT's quarterly earnings call, much appreciated, and wishing you all a good day ahead.
Operator: Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect. Speakers, please stand by.
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