Good day, and thank you for standing by. Welcome to the Q3 2026 DHT Holdings Inc earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star, one, and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one, and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Laila Halvorsen, CFO. Please go ahead.
Thank you. Good morning and good afternoon, everyone. Welcome, and thank you for joining DHT Holdings third quarter 2026 earnings call. I am joined by DHT 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 November 17th. 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 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 usual, we'll start the presentation with some financial highlights. The third quarter of 2026 was a record quarter for the company, surpassing the previous record achieved in the second quarter of 2026. The results reflected a supportive tanker market and strong commercial performance. In the third quarter, we achieved revenues on TCE basis of $290 million and adjusted EBITDA of $269.5 million. Net income came in at $270.9 million, equal to $1.68 per share.
After adjusting for the non-cash fair value gain related to interest rate derivatives of $2.2 million and the gain on sale of DHT Bauhinia of $34.2 million, we had ordinary net income for the quarter of $234.5 million, equal to $1.45 per share. Vessel operating expenses for the quarter were $19 million, and G&A for the quarter was $4.3 million. In terms of market performance, our vessels trading in the spot market earned an average of $167,100 per day, while the vessels on time charters achieved $114,200 per day. The average combined TCE for the fleet in the quarter was $141,300 per day. We continue to maintain a very strong balance sheet, supported by conservative leverage and robust liquidity. At the end of the third quarter, total liquidity was $555 million, consisting of $154.7 million in cash and $400.7 million available under our revolving credit facilities.
At quarter end, financial leverage was 10.5% based on market values for the fleet, and net debt was about $50 million per vessel, way below estimated residual values. Looking at our cash flow, we began the quarter with a cash balance of $162 million. During the quarter, operations generated $269.5 million in EBITDA. Debt repayments and cash interest totaled $17 million. Proceeds from sale of vessel was $51 million, and $197 million was distributed to shareholders through a cash dividend. In addition, we invested $4.6 million in vessels and $91 million in vessel under construction. Changes in working capital and other items amounted to $93 million, and the quarter ended with $154.7 million in cash.
In line with our capital allocation policy of paying out 100% of ordinary net income as quarterly cash dividends, the board has approved a dividend of $1.45 per share for the third quarter of 2026. This marks our 67th consecutive quarterly cash dividend. The shares will trade ex-dividend on November 23rd, and the dividend will be paid on November 30th to shareholders of record as of November 23rd. On the left side of this slide, we also present our estimated P&L and cash break-even leverage for next year. Our P&L break-even for 2027 is currently estimated at $29,200 per day, while our cash break-even is currently estimated at $20,600 per day, which reflects all true cash costs, meaning OpEx, G&A, CapEx, debt installments, and cash interest. The difference between our P&L and cash breakeven is currently estimated at an average of $8,600 per day per vessel.
The 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 fourth quarter of 2026. We expect 1,174 time charter days covered for the fourth quarter at an average rate of $100,200 per day. This rate includes profit sharing for the month of October and the base rate only for November and December for contracts with profit-sharing features. Two of our vessels operate under time charter arrangements with profit-sharing mechanism, allowing them to participate in the spot market upside. We also anticipate 930 spot days for the quarter, of which 68%, or 630 days, have been booked at an average rate of $579,900 per day. These bookings reflect a very strong market environment and tee up for another quarter with record earnings.
Importantly, none of the booked spot days relate to voyages in the Persian Gulf, demonstrating that earnings have been achieved across our broader trading portfolio and in line with DHT's risk appetite. The first nine months of 2026 have already exceeded the company's previous record full-year financial performance by a good margin. Given the strength of bookings to date, with the fourth quarter expecting to surpass the third quarter, 2026 will establish a new annual earnings record for the company. The spot P&L breakeven for the quarter is estimated to be below zero, as earnings from our time charter portfolio are expected to more than cover forecasted operating, financing, and overhead costs. Now, I'll turn the call over to Svein.
Thank you, Laila. I will now briefly walk through our key quarterly highlights. We delivered the DHT Bauhinia, built 2007, to her new owners in July 2026. Cash proceeds from the sale were $51 million, whilst the capital gain was $34.2 million. We took delivery of a newbuilding, the DHT Impala, on July 24th. This was some five months earlier than the contractual commitment by the yard and marks the fourth and final vessel in our 2026 newbuilding program. The vessel entered the spot market with a highly rewarding start to her life with us. We entered into three-year time charter contracts for DHT Jaguar, built 2015, and DHT Panther, built 2016, with rates at $75,000 and $100,000 per day respectively. The vessels delivered into their services in September and October. We have completed dry dockings for seven vessels year to date.
All projects were completed on schedule and within budgets, marking the completion of our 2026 dry docking program. We have four vessels scheduled for dry docking during 2027. These are DHT Sundarbans, DHT Opal, and DHT Taiga, all built in 2012, which will undergo their third special survey, whereas DHT Tiger, built in 2017, will undergo her second special survey. Moving to events subsequent to the quarter, in line with our long-term fleet development plans, we have entered into an additional newbuilding contract with Hanwha Ocean. This will be the sixth addition to the Antelope class, which commenced delivery in January 2026. She will be named DHT Sable and will also feature large carrying capacity and come equipped with an exhaust gas cleaning system.
She is scheduled for delivery in April 2029 and leaves us with an order book of two VLCC newbuildings, the first scheduled for delivery in August 2028. Both orders have been concluded with what should be assumed to be early and competitive delivery slots. These orders will be financed by internal resources, cash flow from operations, and projected new mortgage debt. We will share some thoughts on the order book and what it potentially could mean for DHT. The current order book now stands at 320 ships over the coming four years against a fleet of 940 ships. The fleet total includes ships storing oil. We expect 44% of the fleet to be older than 15 years by the end of 2030, 30% older than 20 years, and 14% older than 25. Hence, a global fleet renewal is required. These numbers assume no scrapping.
China is developing its shipyard industry at an impressive pace and is set to construct some 77% of the current VLCC order book. Within the Chinese shipyards representing this part of the order book, some have experience in building large tankers, and some have ambitious plans for this space. Looking under the hood of the VLCC order book, we have at our liberty broken it down to four categories, being, one, traditional ship owners, two, oil companies/traders, three, national companies, and four, financial actors. We believe parts of the order book to represent ships or fleets that not necessarily have natural homes. We have built up a strong and resourceful balance sheet to support continued investments in our fleet and customer offerings when the right opportunities appear. We think it reasonable to expect that some of such opportunities could evolve out of the order book in due course.
Hence, a perceived threat could become an opportunity to DHT. The freight market remains strong due to ongoing logistical disruptions resulting in operational inefficiencies in combination with shifting crude procurement patterns, expanding transportation distances. Geopolitical risk persists because recent events demonstrate for the first time in history that the full or partial closure of the Strait of Hormuz is possible, altering long-term risk perceptions even if regular traffic resumes. Supply chain resilience is a priority for Middle Eastern oil producers, but expanding their logistical capabilities will not automatically restore the tanker fleet's historical productivity levels. Energy security concerns should drive a major inventory restocking cycle by governments and corporations, which is expected to boost transportation demand above actual consumption levels. Private consolidation is tightening market dynamics following a structural fleet consolidation by a private aggregator earlier in the year, resulting in fragmented spot supply and restricted information flows.
Limited effective fleet supply growth due to an aging fleet, a growing share of vessels operating outside mainstream trades, and a limited near-term newbuilding delivery schedule. News flows and U.S. midterm election results move commodity and capital markets, and fuels volatility, including significant near-term deltas between physical and derivative markets for freight, as well as creating large bid-ask spreads of term contracts. With that, operator, we are now ready to open the floor for questions.
Thank you. As a reminder, to ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. Our first question comes from the line of Omar Nokta from Clarksons. Please go ahead. Your line is open.
Thank you. Hi, Svein. Hi, Laila. Good afternoon. Obviously, very strong update, very good guidance, and the market continues to be very fluid and fast-changing. Maybe just on your last couple of points, Svein, I wanted to just follow up. Clearly, spot rates have been volatile, they've been elevated, but they have come down here over the past month or so from their very elevated levels back in early September. Still strong, but just as you think about where things are going, if we get to a point where the U.S. and Iran have reached an agreement that there seems to be at least expectations given the shift in the Brent curve, how do you think the VLCC market looks as we move forward in a scenario where you have a reopening, quote, unquote, of Hormuz versus what we're seeing today via the shuttling and ship-to-ship transfer market?
Hi, Omar. I think the news flow proven this year has been very, very volatile, right? We had news in one direction one day and news in another direction the next day, and some of the psychology spills into, of course, markets and how they are playing out. I think it is actually very hard to know how this will work now and whether it is a deal or not, right? I really think that if, for sake of argument, there is a deal with some level of opening or resumption of traffic, it will take quite a while to unwind all these inefficiencies that is in place, right? I have a hard time to see that anything falling out of bed, frankly.
We have ships in the market all the time, and as of present, there is still significant interest at very good levels for vessels that you have available in the spot market. It will vary a bit from trade to trade. I would say that trades in and around the Middle East are probably holding up a bit better than some of the South American trades. But the market is dynamic, and if there are big differences, one basin will pull ships from another basin and so forth. I do not think there is any reason here to be overly concerned. But you can say in nominal terms, if the market drops from, say, $800,000-$900,000 a day to $600,000 a day, it is a significant change that is still at extraordinary levels, right? I think we have still good reasons to be very confident in our business.
Yeah. Thanks, Svein. Appreciate that. Then maybe just a follow-up and maybe on DHT more specifically. Also, in your last comments, you talked about the charter market being somewhat of a wide bid-ask spread. You do have a handful of vessels rolling off charter next quarter, especially those ones that you had booked earlier this year on those lucrative 12-month contracts. How are you thinking about what you do with those vessels as they roll off? I mean, clearly there is a lot of time between now and then, especially in this market. But as you think about your charter cover and then the ability to extend them, has the charter shown an interest or a willingness to want to extend them? Then from your perspective, what would you rather do?
Put them on the spot, keep them on contract on a fixed rate basis, or does profit share sound more agreeable?
As you pointed out, Omar, there's still some time left for this to happen, so it's too early to say. It is too early to say.
Okay, that's fair. Thanks, Svein. I'll pass it back.
Thank you, Omar.
Thank you. Once again, as a reminder, to ask a question, you'll need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. We'll now move on to our next question. Our next question comes from the line of Jon Chappell from Evercore ISI. Please go ahead. Your line is open.
Thank you. Good afternoon. Svein, little help maybe with the profit share on your time charters. If I look at the fleet list on your website, it is just two ships with profit sharing, Appaloosa and Puma. But the amount that you are earning on the time charters, especially if we look backwards to the third quarter, makes it seem like it is more than just two, just trying to work on the math. Are there any other profit-sharing arrangements that are not listed on the fleet tab? If not, can you at least help us with the terms of those current two to try to rectify some of the math on that time charter rate?
Thank you, Jon. There are only two ships with profit-sharing mechanism on the time charter fleet. I think the numbers you allude to reflect that these structures have been very rewarding for DHT, but we are not disclosing the details of these structures. I think you just need to look at the number, and I think this is good for the shareholders, in my simple answer, really.
The Puma expires in the first quarter of next year, which would leave just the Appaloosa. A, confirmation of that, and then B, are there other opportunities out there to create similar structures? It feels like everything that you signed in the last year or so has been a fixed rate, and you have to kind of balance taking advantage of an incredible time charter rate with the exposure of an even more incredible spot market. Just wondering if that type of activity has dried up in the chartering world, just given the extraordinary circumstances.
Yeah. You are right on the Puma. That is expiring in the first quarter. I think, as you allude to here, the extraordinary sort of freight environment makes it difficult to implement profit-sharing structures, at least in the way they have been done. Maybe there are different ways to skin the cat, so to say. We will, of course, look at that if that is possible. It could maybe sort of have collar structures or caps and things like this, and other ways of creating like a semi-derivative, right? But we do not have any discussions of this nature at this current time. Right now, the focus is on having the ships in the spot market, enjoy the spot market to the extent possible. And we expect a bit further down the road to be some more longer-term opportunities coming out to the market, but it is a bit premature.
Okay. That's all I had today. Thank you, Svein.
Thank you, Jon.
Thank you. There are no further questions at this time, so I'll hand the call back to Svein for closing remarks.
Well, thank you. That's a wrap. So, thank you for staying tuned into DHT. Wish you all a good day ahead.
This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.