Amid skyrocketing spot rates, DHT Holdings has put six of its ships on year-long charters, five of which have options to extend.
The New York-listed tanker owner said after the close on Wednesday that the sextet was chartered out for an average of $67,300 per day — among them the 298,564-dwt DHT Lake (built 2004), which had a charter at Worldscale 215 fail in mid-March.
The other five are the 298,563-dwt DHT Raven (built 2004), 317,826-dwt DHT Scandinavia (built 2006), 301,019-dwt DHT Bauhinia (built 2007), 301,021-dwt DHT Edelweiss (built 2008) and 299,629-dwt DHT Lion (built 2016).
"The current dramatic swings specific to our market [demonstrate] what we believe has always been, and will continue to be, a highly cyclical and volatile market. And herein [lie] the opportunities," co-chief executives Trygve Munthe and Svein Moxnes Harfjeld wrote in a shareholder letter published alongside the fixture announcement.
Data from Poten shows the one-year rate for an eco VLCC was $70,000 per day on Wednesday.
But VLCC spot rates have shot up in recent weeks, thanks to Saudi Arabia pumping oil into a market already experiencing depressed demand because of Covid-19.
In that market, ships on a Middle East Gulf to Singapore voyage were earning $264,748 per day, and $241,098 per day on a Middle East Gulf to China route, according to the Baltic Exchange.
Munthe and Harfjeld said the charters were still "highly profitable" and will lower the breakevens for the DHT tankers in spot trades by $2,600 per day for the rest of 2020, while driving $121m of Ebitda.
'Very robust'
"This is in our view very robust and we believe you would be hard pressed to find any public company matching this number."
DHT said it has 10 of its 27 tankers on time charters, including the six announced on Wednesday. The remaining four will not come off charter until June 2021 and November 2022 and have average rates of around $31,500 per day plus profit-sharing arrangements.
The company's shares closed the day up $0.09, or 1.17%, to $7.76, but promptly fell to $7.70 in after-hours trading.
The DHT Lake, DHT Raven, DHT Bauhinia and DHT Edelweiss have a six-month option at the end of the 12-month fixed period. The DHT Scandinavia has a three-month option and the DHT Lion will come off charter after the year.
Smart move
Fearnley Securities said it believes only the DHT Lake and DHT Raven have scrubbers fitted.
"Despite spot rates being at a multiple of the time charter levels, we see this as a smart move from DHT given the current market uncertainty and the fact that the time charters (except DHT Lion) cover some of the oldest vessels in the fleet," it added.
With average cash breakeven rates across the fleet at $22,000 to $23,000 per day, DHT is "generating some serious cash flow with these charters of around $16.3m each", Fearnley said.
With other term deals in place, DHT has in effect fixed out 37% of its fleet at $53,000 per day.
This leaves the average breakeven for the remaining spot vessels at between $2,000 and $3,000 per day, Fearnley said.
