Good day, and thank you for standing by. Welcome to the third quarter 2021 DHT Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone.
I must advise you that this conference is being recorded today on Wednesday, the 1/3 of November, 2021. With us on our conference call today, we have Svein Moxnes Harfjeld, Co-CEO, and Laila Halvorsen, CFO. Now, without any further delay, let me hand you over to Laila Halvorsen. Please go ahead.
Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings third quarter 2021 earnings call. I'm joined by DHT Co-CEO, Svein Moxnes Harfjeld, and Wilhelm Flinder, Head of Investor Relations. As usual, we will go through some financials and some highlights before we open up for your questions.
The link to the slide deck can be found on our website, dhtankers.com. Before we get started with today's call, I would like to make the following remarks. A replay of this conference call will be available at our website, dhtankers.com, until November 10. 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, including DHT's prospects, dividends, share repurchases, and debt repayments, the outlook for the tanker market in general, daily charter hire rates and vessel utilization, forecast of world economic activity, oil prices and oil trading patterns, anticipated levels of new building 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 EDGAR system, including the risk factors in these reports for more information regarding risks that we face. As you all know, we are still in a historically weak tanker market, which has impacted the results for the third quarter of 2021. Looking at the P&L highlights, EBITDA for the third quarter was $14 million, and net loss came in at $21 million.
The result includes a gain of $1.6 million related to the sale of DHT Condor and a non-cash gain in fair value related to interest rate derivatives of $2.3 million. The company continued to show a very good cost control. OPEX for the 1/4 came in at $19.2 million, equal to $8,000 per day, while average OPEX year to date is equal to $7,800 per day. G&A for the 1/4 was $4.4 million. In the third quarter of 2021, the company achieved an average TCE of $16,300 per day, while the average TCE for the first 9 months of 2021 amounted to $22,400 per day.
For the fourth 1/4, we have booked income for 70% of the fleet at an average rate of $27,700 per day. This includes 25% of the fleet on time charters at an average rate of about $32,000 per day. Moving over to the balance sheet.
The 1/4 ended with $64.5 million of cash. At 1/4 end, the company's availability under both revolving credit facilities was $180.5 million, putting total liquidity at $245 million as of September 30. Financial leverage is about 30% based on market values for the ships, and net debt per vessel was $17.7 million at 1/4 end, which is well below current scrap values. Looking at the cash bridge, the 1/4 started with $52 million of cash, and we generated $14 million in EBITDA.
Ordinary debt repayment and cash interest amounted to $7 million. $10 million was used related to share buyback and dividend payments, and $2 million was used for maintenance and scrubber CapEx. Changes in working capital amounted to $11 million. Proceeds from sale of vessels were $30 million, and the 1/4 ended with $64.5 million of cash.
The change in working capital for the 1/4 is mainly a result of vessels on time charters being redelivered and bunkers being purchased back from charters. Now over to capital allocation. For the third quarter, a total of $10.1 million will be returned to shareholders. As previously announced, the company bought back 1.23 million of its own shares at an average price of $5.47. The shares were retired upon receipt.
In addition to the share buyback, the company will pay a dividend of $0.02 per share for the 1/4. It will be payable on the 23rd of November to shareholders of record of the 16th of November. This marks the 47th consecutive quarterly cash dividend. Year to date, the company is returning $42.7 million to shareholders, $13.5 million in cash dividends, and $29.2 million in share buyback. With that, I will turn the call over to Svein.
Thank you, Laila. Here on this slide, we will offer an update on our cash breakeven levels. On the graph to the left, you see our cash breakeven levels for the fourth 1/4. The full fleet needs to generate $15,800 per day, and our spot fleet $10,400 for the company to be cash neutral during this period.
On a similar illustration in the graph on the right, you will see that the full fleet needs to generate $14,200, and our spot ships $10,600 during the first 1/2 of 2022 for the company to be cash neutral. This is the DHT way, a robust structure to protect the downside without giving away the upside. We'll discuss our dry docking program.
Continuing our efforts in the 2 prior quarters, we have again taken advantage of the weak spot market to bring forward dry docks. During the third quarter, we recorded 85 off-hire days in connection with dry docks. We expect another 100-125 days during the fourth 1/4. The most recent and current dry docks are extending in time as quarantine rules for ships and crew entering the shipyard we use in China has tightened, resulting in additional waiting time.
Additionally, when vessels come out of dry dock, they are typically handicapped in the spot market for their first voyage and have to offer discounts and possibly encounter waiting time to commence trading. Hence, our spot earnings these last quarters were negatively impacted. For the first 3 quarters, we have capitalized $33 million in, for dry docks, installation of scrubbers, and ballast water treatment systems.
Our team is doing a great effort, and we will by year-end have drydocked 50% of our fleet, making these ships ready for what we expect to be a better market next year. For next year, there are only 3 ships scheduled for drydocks. The way we are positioning the company is a reflection of our constructive view on the market.
On the left-hand side, we illustrate the time charter versus spot exposure for our fleet. You will note that the time charter book is coming off from what has been very beneficial levels, building market exposure into strengthening fundamentals. On the right, we estimate the discretionary cash flows in DHT at different rate levels.
As an example, if spot earnings are $50,000 per day for 2022, we estimate that the discretionary cash flow to be $296 million, equal to $1.28 per share. This reveals the operational leverage and significant upside that we have put in place. To round it up, we have a large quality fleet and a strong and healthy balance sheet with 30% interest-bearing debt to total assets on a mark-to-market basis.
We have a consistent and what we believe to be a well-designed strategy matched with a proven ability to manage the business cycles. We introduced our capital allocation policy from the second 1/4 2015, and it has remained consistent. On the market, we believe that the worst is behind us and see a market recovery in the making.
The recovery it is at a measured pace, with key elements in the oil market that drives our constructive view. These elements are, one, the recovery in global oil demand post the COVID shock, in particular related to increased mobility. Two, crude oil inventories having been drawn down to Pre-COVID levels. Three, OPEC+ responding with additional barrels to the market. The positive dynamics can, among others, be read through improved refining margins. We think we are in great shape and are tuned for recovery. With that, we open up for Q&A. Operator?
Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question today, please press star and one on your telephone. Our first question today comes from the line of Randy Giveans of Jefferies. Please go ahead, your line is now open.
How are you, Team DHT? How's it going?
Going great. How is Texas?
Oh, all is well despite the Astros last night, but that's okay. I guess looking at slide 6, you returned a little over $10 million to shareholders, right? That's despite negative earnings in 2Q and obviously 3Q now. How was that amount decided on? Secondly, for the share repurchases, you know, it looked like you repurchased almost $7 million there. How was that amount determined, and was that just a result of shares trading well below NAV at the time?
It's not a fixed formula for this, and the buybacks are somewhat optimistic. At the same time, there are some very clear sort of trading rules how we can buy back our stocks in the market. Lastly, we are price sensitive. This is what we felt we could meaningfully do at the time when the shares were trading at these levels. We are very happy that we had that opportunity. The amount is somewhat less than what we did in the prior 1/4. I think also now everyone should not expect us to continue these buybacks as the shares are now trading in line with the NAV more or less.
Got it. Yep. No, that was my follow-up there. The $0.02 dividend, that's really the expectation now until you get more meaningful profitability.
As you all know, we have a capital allocation policy of returning minimum 60% of ordinary net income to shareholders. We have a history of paying $0.02 when we've printed the red numbers. Assuming now that the recovery that several people expect to be in front of us, then of course, there is a potential for paying more than $0.02 by applying this formula.
Okay. Second question, you know, looking at your fleet, you've obviously gotten rid of your older ships now with the Condor sale complete. How do you view your fleet currently? Is there any appetite for maybe some charter ins or second-hand acquisitions? Or at this point, you know, with your rolling off time charters, are you know, pretty happy with your current kind of operational exposure into what should be a better market in 2022?
Firstly, we are not planning to sell additional ships at this side of the recovery. We've spent a lot of time and effort now in dry-docking ships as you've seen, and getting these ships ready for you know different earning environment than what we've experienced this year. I think you should expect that during such a market or at the tail end of that, we will consider to divest some further tonnage.
We acquired 3 young ship 5-year-olds, eco ships with scrubbers early this year, and we were set to sort of try to acquire more. But the prices appreciated too quickly, frankly, so we felt that levels became too high to buy ships. We decided to take a step back.
Asset prices of modern ships have sort of held up, so you should not expect us to acquire more and more ships at this point. When it comes to chartering in, we don't like that for a few reasons. One is that, whether it's bareboat or time charter, it's essentially, you know, 100% financing on asset, whether it's a short period or longer period. It will, you know, sort of disturb our cash break-even focus. It will certainly increase that meaningfully if you were to do that. Lastly, when you time charter ships, you're not in control of the technical management and the vetting system on the ships.
That's something which is very important for us in serving our customers, that we are in full control of what we do on the asset side and with the crew and everything. That's not in the cards.
Got it. Well, that makes sense. Thanks, and good to see VLCC rates getting some life here, so hopefully that continues. Thanks again.
Thank you. Fingers crossed here.
Thank you. Your next question today comes from the line of Jonathan Chappell of Evercore ISI. Please ask a question.
Thank you. Good morning or good afternoon. First question is on the time charters. Obviously, you have a few rolling off now in the fourth 1/4. I understand nobody wants to re-up contract coverage when you're still bouncing along the bottom, especially after a period of time, but you've done a pretty good job balancing the fleet, and clearly the recovery in the spot market's taking longer than anyone expected. What's the ability in the market right now for maybe shorter-term charters, 6-12 months? What are the current levels out there, if any, relative to the spot market today?
Yeah, that's a good question, John. The short-term time charters are not very different from the spot market on the longer voyages. Today, eco scrubber ship will earn, say, $20,000 ± for the long voyages. These short-term charters are priced at a marginal premium to that. We think the optionality that you give away or lose by doing those charters they don't really make much sense to us. For a 12- or 24-month charter for a similar ship, you could do that in the low 30,000s, maybe 33,000, 34,000, 35,000, something like that.
That has certainly, you know, improved a bit, and I guess it's a reflection of some of these clients seeing what is ahead, and they want to have some ships in their portfolios. We're not sort of chasing down these opportunities, but we do have some core customers that might have an interest in extending some of these charters that are coming off.
We will have to look at those, you know, transactions when the time is right and when they're closer to expiry of those charters. You know, we are a transportation service company. It's important to have some core customers that you do repeat business with and so forth. Let's see. That is something we typically do, and we have done quite a lot in the past, actually, so.
Okay. I mean, 33-35 for that period, I mean, given the fact that the recovery is lasting or taking a lot longer than anyone would have expected to recover, seems like pretty good business. Of course, you don't put the whole fleet away, at least provides a bit of a buffer. Leads to my second question, which is more market related. It feels like every 1/4 we talk about how things are gonna get better and the fundamentals are improving, but the next 1/4 is still gonna be terrible. That's both you and me have been expecting-
Hmm.
a bit of a recovery by now, especially as we're into November. Can you speak to maybe why this is taking longer, and what gives you the confidence that at some point imminently, we're gonna hit an inflection point where the market improves?
Hmm.
Not just off current levels.
Yeah.
Meaningfully off current levels to warrant maintaining the spot exposure into next year.
Sure. I think, you know, we've been a bit more modest in our market expectations than maybe most others. I think even last earnings call, we said that the recovery is a bit slower, taking a bit longer time than maybe what most people expect. Of course, the COVID shock was brutal and we're not yet back at oil consumption levels that we were Pre-COVID.
If you look at what the sort of leading agencies are forecasting, we have to wait until end of next year to sort of hit those levels. During this period, we have seen the fleet grow, so we have more ships today than what we had just Pre-COVID. There is an imbalance in that market.
Scrapping has been very, very quiet as a lot of these older ships have been engaged in a bit more sort of shadier trades. Although scrapping is picking up a bit now, and I think we count 17 ships having left the fleet so far this year, some of those came out of storage, but we see some of the owners of these ships buying sort of slightly or less old ships, if you like, to replace those storage units. It's a little bit of retirement going on, but it's not enough yet. We look at this whole recovery as a bit of a slow moving train out of the station, and we still think sort of the fundamentals are right.
There's no X factors in you know so far that is giving any sort of turbo to a recovery. You could of course have a lifting of sanctions. We think that would change the game quite quite dramatically actually if Iran comes back in a full extent. The you know the bulls expected them to be back in the second 1/4 this year. I guess the bears on Iran are looking into next summer. I'm in no better position to view that. That is a potential sort of event that can change things quite quite a lot.
Okay. Thank you, Svein.
Sure.
Thank you. Your next question today comes from the line of Omar Nokta of Clarksons Platou Securities. Please go ahead.
Thank you. Hi, Svein. Yeah, I just wanted to follow up on the discussion with John. You do definitely sound quite a bit more constructive on next year and definitely more than how you sounded 3 months ago. I think you mentioned that DHT felt the recovery was gonna take longer than most people anticipate. You know, maybe just on that discussion here, I wanted to gauge perhaps if you let me your level of constructiveness, you know, all else being equal because there's always gonna be something that changes.
The current plan with OPEC+ adding 400,000 barrels a day each month for up until September, October of next year, when we think of a recovery, all else equal, do you think we could start to see a recovery happening sooner than the tail end of those production additions, or could it happen, or do we have to wait until basically, you know, next fall for a real recovery? Any color in the thoughts?
I think as I commented, you know, the recovery so far is measured and we expect it to continue to be measured for a little while longer. You know, we are now at for modern ships in the spot market, 20,000 maybe plus even. At this pace, you know, you will have sort of profitable levels coming out not too far out.
There are some smaller things happening in the market that will have impact beyond just OPEC+ adding barrels. I guess as you and most people have seen the rocketing gas prices is now having some impact on what's going on in the sense that gas is also used by refineries to desulfurize the crude that they consume.
As gas is now very expensive, refineries are looking to buy more light sweet to avoid the sort of medium to heavier sour stuff and use gas. This type of oil is predominantly being loaded from the Atlantic. You see maybe some ton mileage expansion now just in sort of compared to what we have seen in the last 12-24 months. This is maybe a smaller item, but it's really all those things that we need, right, to sort of push the needle in the right direction.
Okay. Yeah. Thanks for that, because I did want to follow up and I think you may have answered that to an extent, you know. I was gonna see if you have noticed from your vantage point if charters perhaps were acting any differently, especially with high energy prices and inventories continuing to come off, especially with us approaching winter.
I was gonna see if you have seen any noticeable changes, whether they're looking to take ships on charter as John had sort of been asking about, or if they're looking to fix ships on the spot market maybe earlier than we've been used to seeing. Anything there you can add?
There's definitely more interest on the time charter front. That's for real, and I think that's a reflection of whether it's being, you know, as traders or real end users. They would like to have ships or they need to have ships. This is I think simply a reflection of their view of the market and the expected activity that they will have.
That's definitely happening. I think that's sort of a little leading indicator, if you like. The overhang of ships have reduced quite dramatically these last few months after OPEX started to add barrels. This means that the charters are now entering the market at a more sort of normal pace trying to fix ships.
I think earlier they took their own time when the overhang was much greater. There is a change in all this dynamic. My point is that it's not going sort of rapidly, but it is happening steadily and measured, and eventually sort of you come to the tipping point when you can get some more traction on rates.
Yeah. Very good. All right, we'll keep our eyes open for that tipping point. Thanks, Svein.
Thank you. Your next question today comes from the line of Magnus Fyhr of H.C. Wainwright. Please ask your question.
Yeah, thank you. Good afternoon. Just a follow-up question on the market sentiment. You mentioned that you would entertain some time charters from some of the key customers. You know, time charter coverage has been as high as 60% in the last 12 months. Is there any preferred level going forward as far as keeping. I mean, I guess we agree that the markets probably have hit the bottom and we should recover going forward. Is there a preferred level to keep the fleet on spot to maintain the upside, or how would you structure some of contracts maybe perhaps with profit sharing?
You know, we are a simple business guys, right? We look at the money. When rates are at meaningful levels, we try to engage as much as we can really in time charters. As you saw last year, we did a lot of time charters at very rewarding rates.
This summer, it hasn't really been very exciting. I think you should expect that once rates are at sort of meaningful levels again, depending a little bit on the trajectory of the general spot market, but then we will certainly seek to increase our coverage again. There's no fixed percentage. You have to keep in mind that time charter market for large tankers, the liquidity is rather thin.
It's not that much business if you look on the fleet as a whole. Hence it's important to have customers in your sort of portfolio that do engage in time charters and where you have, you know, the opportunity to do some repeat business and then so forth. We feel we are in that camp. Once we see meaningful money, we will seek to engage again.
All right. Thank you. Just one question on the dry docking. You mentioned you have 3 ships going into dry dock next year. Any thoughts or can you move them up, or what? How is the thinking there of when you wanna do them if the market improves?
The plan on the schedule is 1 for the first 1/2 and 2 in, I think, the third quarter. You know, it could be that we, you know, for some reason, have an opportunity to bring them forward, depending a bit on the market and all that and, you know, yards capacity and equipment's gonna be delivered and so forth. That's a tentative schedule.
All right. I just want one final question just on the cost side. Have you seen any changes here? You mentioned that there's an increase in time to dry docks, but in general, as far as the daily OpEx, do you see that kind of normalizing here, or do you see potentially more costs for COVID related expenses?
I think we managed our OpEx side quite well during these times, but there has been additional cost and time related to crew changes in particular. This crew change story is still a very big challenge for the industry, you know. I think every ship owner has got crew that is staying on board longer than originally or normally planned, or have to take some time and deviations into ports for crew changes, you know, is possible, and depends on nationality. It's still a very, very difficult task. You know, hats off to the guys we have that are running our crewing. There's marginal cost. As you see, Laila addressed, we have $7,800 year to date on our OpEx side.
That includes all the overhead cost of the shore-based staff, as well as related to the technical department, essentially. I think that's still a very good number.
No, I agree. Thank you for the flavor, though. Thank you. That's all I had.
Sure. Thank you.
Thank you. Your next question today comes from the line of Ben Nolan of Stifel. Please go ahead.
Hey, good afternoon, guys. I just have one question, and it relates to sort of some of the noise that's been going on in the market. Obviously, 2 of your competitors on the VLCC side have been or there's been some noise about potential consolidation. I'm curious, you know, you guys have done some of that in the past with BW and, I'm curious where you stand in terms of saying, okay, well, are there benefits to economies of scale, either from a shipping perspective or a capital markets perspective? Are you at all interested in that or more sort of a curious observer from afar?
We think from a sort of industrial perspective, we are certainly big enough. None of our customers are, you know, chasing us for more ships or, you know, complaining about the fleet not being big enough. It's certainly big enough. We have a meaningful footprint in the market.
I think on the debt financing side, you know, we are financing ourselves at equal or maybe better terms even at than companies that are our size or even larger. I think in the equity markets, our stock is relative to underlying values, is trading better than some of our bigger competitors. We are not sort of sold on this idea that size is going to change all of this.
We tend to joke a bit that the noise, you know, on consolidation is mostly driven by bankers who wants to earn some fees on this. Not necessarily the shareholders. We have a very handsome book of owners in our company, and none of them are sort of chasing us to make the company bigger just for the sake of being bigger or trying to quantify what the economics of that can be.
You might have some benefits on G&A because, you know, if you are even bigger, you can be a little bit more efficient, but that's not a big item on the P&L line in the shipping companies. There are other things that are more important.
That being said, I think we've demonstrated in the past, as you alluded to, that we acquired some core ship holding in 2014. We acquired a BW fleet in 2017. We are always open to what can be good opportunities and will, you know, be a good transaction for the shareholders of DHT.
Okay. That is helpful and straightforward. Incidentally, you guys are always helpful and straightforward and don't make things relatively easy for us, so I appreciate that. Thanks.
Thank you.
Thank you. We do have one more question at this time, but as a reminder, if you wish to ask a question, it's star and one on your telephone. Your next question comes from the line of Ronald Silvera, Marine Surveyor. Please ask your question.
Hi, fellows. I'd like to talk a little bit about the debt and the fact that you guys have reduced the debt in a little over a year from over $900 million down to $525 million. If you see the market, which we're anticipating, we're at the bottom, it is going to turn up and the profitability starts to get like it was in early 2020, do you see again more aggressive debt reduction, or are you just satisfied with the normal amortization rate?
No, I think our you know our actions in the past to do prepayments of debt to strengthen the balance sheet was, of course, a result of roaring markets. When we allocate capital, you know a good portion of it will go to the shareholders, but we then use the other portion to either invest when the time has been right or to reduce debt. I think you should expect more of the same in the future.
This business is certainly a very cyclical and volatile business, and I think it behooves a company to have as strong a balance sheet that you can have and maybe you know even lower debt per ship than what we have today to give you even more flexibility. I think that should be expected, yes.
Wonderful. Yeah, the Year-Over-Year reduction in interest expense just screams about what a good job you guys have done in anticipating and taking advantage of the good times. I compliment you on that. The other thing I have a question around, I noticed that you built up quite a bit of your consumable inventory and that fuels, et cetera. Was that because of a lesser rate of business or because you anticipated the rise in oil prices and squirreled away some additional inventory?
That's a very good observation, sir. What it is, it's essentially bunkers. It's a result of when we get ships back from time charter, the remaining bunkers on board on the ship, and the customer returns the ship to us, we have to acquire. This impacts then the inventory or the working capital in the company. You know, when we had much more spot exposure and when oil prices, you know, it will also be oil price sensitive, of course, this will vary. We do not speculate on bunkers.
We don't buy fuel oil or bunkers in anticipation or the belief that now the rates will go up, because the freight market for tankers is based on what is called Worldscale, and the bunker cost is sort of included in that. It's a very good correlation between that and the freight level. We only buy bunkers when we fix the ship, so not in sort of a speculative way, and we also don't hedge bunkers.
Okay. Well, you ended up doing a real good job because it's nice to have that extra while the prices of oil have gone over $80 a barrel. Thank you. That's all my questions.
Sure.
Congratulations.
Thank you very much.
You've been doing a real great job, especially.
Thank you.
Continuing to reduce the debt.
Thank you, sir. Wishing you a good day ahead. Bye.
Your next question today comes from the line of Chris Tsung of Webber Research. Please go ahead.
Good afternoon, Svein. How are you?
I'm good, thanks.
I apologize for asking if somebody asked earlier. I got dropped off the queue or the call rather. Were you guys able to break out the amount fixed on the spot for Q4 and what the rates were?
We can do that for you. For the Q4 it's 59% at $13,700 per day.
Thank you. I see it in your press release, the $300 million from DNK for insurance. What is this for and how much we should anticipate for withholding tax, what the rough ranges would be?
This is a sort of a mutual club, right? They build up a capital base that belongs to its members. The club has decided that part of this capital should be then returned to its owners, if you like. It's a capital reduction in the unit, and we will be entitled to an amount in the range of $5.5 million-$6.5 million. We expect that to be received in the first 1/4 next year. Withholding tax could be in the sort of 25% range. But all this has to be determined, so that's why we're not more specific in the press release. Don't arrest us on the exact number, but it could be in that range.
Yeah, I know. I understand. That's super helpful color. I guess this is like just a one-time payout. We shouldn't expect this again anytime soon.
That's correct.
Cool. Lastly, for the dry docking program, it looks like it's about $3 million or so CapEx per vessel. Is that like a good run rate for the 3 in Q4 and the 3 in 2022?
I think you can follow up offline with Wilhelm Flinder on that. The ships next year are a bit different vintage. There is less sort of equipment installation and stuff like that. Feel free to follow up directly with him.
Okay. Yeah, will do. Thank you so much. That's it for me.
Thank you.
Thank you. Once again, ladies and gentlemen, it's star and one on the telephone, if you wish to ask a question. We do have one more question at this time. This comes from the line of Michael Mouskov of MRM. Please go ahead.
appreciate it. Can you elaborate on 2 things? Can you elaborate on when you said if they lift sanctions, it could change the landscape, in what manner? The other thing is, I was on a Capital Link conference with the tanker CEOs of Euronav, INSW and Frontline, and all of them said by the end of next year, they expect VLCCs to be 40,000+ based on basically some of the things you noted in your press release. Love to know what your thought is on that too. Thank you.
To your first question, today, Iran is selling part of their oil sort of under the embargo regime, so they have to sell it at a discounted price. They have to use ships that are willing to trade embargo oil, and they have to pay a premium for those ships.
These are the old tankers, if you like, that are involved in this trade. If sanctions gets lifted, then that oil will be traded in the market at market prices, and they will have access to freight at market prices. We think these older ships that are involved in that trade, then they will, because they have been in sanctioned trade, they will be out of business.
That oil will then benefit the rest of the fleet, which is sort of the normal fleet, if you like. the older ships, we think, will then disappear from the scene. the net benefit of that is a smaller fleet and more oil in the market. That's why we think this is a potentially good event. On your second question, you know, I've been in this game for 30 years and I am not prepared to give you that number.
You're hesitant to give the number.
Uh, uh-
Okay.
I will not provide a number. You know, when we sort of give ideas and opinions on direction of the market, that is, a sort of genuine belief. Let's see what, how it will play out.
Okay. Appreciate it. Thank you so much.
Thank you.
Thank you. It appears there are no further questions at this time. Svein, back to you.
Thank you very much to everyone for staying tuned on this deal. Wishing you all a good day ahead. Take care.
That does conclude our conference call today. Thank you all for participating. You may now disconnect.