Eirik Uboe - CFO Svein Moxnes Harfjeld - co-CEO Trygve Munthe - co-CEO

Jon Chappell - Evercore Spiro Dounis - UBS Herman Hildan - Clarkson Plateau Fotis Giannakoulis - Morgan Stanley Ronald Silvera - R.E. Silvera & Associates Marine Surveyors Michael Webber - Wells Fargo Noah Parquette - JPMorgan James Jang - Maxim Group

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, through May 16, 2017. In addition, our earnings press release will be available on our website and on SEC's 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 repayment; the outlook for the tanker markets in general; daily charter hire rates and vessel utilization; forecast of world economic activity; oil prices and oil trading patterns; anticipated levels of newbuilding and scrapping and projected dry dock schedules. Actual results may differ materially from expectations reflected in these forward-looking statements. We urge you to read our periodic reports available on our website and on the SEC's EDGAR system, including the risk factors in these reports, for more information regarding risks that we face. I'm joined today by DHT's co-CEOs, Svein Moxnes Harfjeld, and Trygve Munthe. And with that, I'll turn the call over to Svein.

Thank you, Eirik. Good morning and good afternoon and thank you for joining the DHT first quarter 2017 earnings call. During the call, we will go through our operational and financial highlights, capital allocation, cash and P&L breakeven as well as commentary on the BW transaction and Frontline's pursuit of DHT. Let me start by saying that during our first quarter, we were pleased to achieve strong operational results and to continue to execute our strategy of disciplined countercyclical growth. We are proactively managing the cyclical market environment through a balanced approach to fleet building, operations, costs and capital allocation. Our well-defined strategy is serving us well through both peak and trough periods, and we are confident that it will continue to do so going forward. To that end, the asset values are at their lowest point since 2013, and as earlier stated, we believe that 2017 will be a year right for expansion. We have already capitalized in this first quarter with acquisition of BW's VLCC fleet, which we'll go into in more detail later in this call. We have also continued to deliver significant value to shareholders by returning capital whilst maintaining a strong balance sheet. We have made important progress this quarter and look forward to continuing to build on our momentum as we move through the rest of the year. Turning now to our first quarter highlights. We delivered a solid quarter with EBITDA of $50.6 million. Our spot earnings came in at $40,900 per day, a respectable number in our opinion. We continued our quality operations with excellent approvals of our ships by our customers, insignificant off hire and very competitive OpEx. Adjusting for the loss of the sales of DHT Phoenix and DHT Ann, our first quarter performance translated into $21.8 million in net income equal to $0.23 per share. This performance reflects on our quality fleet operated by our competent and highly motivated organization. The quarter was indeed an active one, with significant changes in our fleet. We continued to renew our fleet by taking delivery of the last order Cat-class VLCCs from Hyundai in January. She is named DHT Tiger and is trading in the spot market. We now have six of these ships in operation and can confirm that excellent fuel economics are delivering efficiencies to our overall earnings. We contracted two 318,000 deadweight VLCCs at Hyundai at what we deem to be very attractive terms. The ships are scheduled for delivery in July and September next year. The contract includes DHT typical extras as well as ballast water treatment systems and scrubbers. We are also retiring some of our older ships, and importantly, all three are expected to lead the trading fleet. The DHT Chris, 2001 built VLCC, was delivered to the new owners in February with net proceeds of $10.2 million. We entered into agreement to sell the DHT Phoenix, a '99 built VLCC at $19.1 million. She is debt free, and we plan to deliver her in June. We also sold the DHT Ann, a 2001 built VLCC at $24.8 million and delivered here early in May with net proceed of $10.9 million. In March, we acquired BW Group's VLCC fleet. The fleet consists of nine ships in the water, plus two newbuildings under construction at Daewoo scheduled for delivery during the second quarter of 2018. We have to date, taken delivery of seven of the ships in the water and have also taken title to the newbuilding contracts. The two remaining ships are due to be delivered to us later this quarter. We have agreed to commercially manage BW's recent order for four VLCCs at Samsung. Following these transactions and adjusting for the sale of the three older units, we will control 34 VLCCs and two Aframaxes, pushing DHT into the premier league of VLCC owners. Expanding a fleet also requires financing, and we have, in our prudent tradition, secured this in connection with the expansion. We have secured bank financing of $82.5 million to finance the two newbuildings at Hyundai. The loan has a 5-year tenor and is priced at 250 basis points above LIBOR. As you would know, we are having a keen focus on cash breakeven. In support of this concept, we have obtained 20-year repayment profile, resulting in the acquired rate to core debt service and OpEx of $16,800 per day. In connection with acquisition of BW's VLCC fleet, we have raised $300 million of bank debt. The loan has a 6-year tenor and is priced at 240 bps above LIBOR. The average required rate to cover amortization, interest and OpEx for the 11 ships will be about $17,900 per day. Both of these two financings are reducing DHT's overall cash breakeven levels, which we will detail later on in this presentation. As mentioned, our spot VLCCs achieved $40,900 per day during the quarter. We consider this a good performance, and the number is pretty much in line with the 25-year historical average. Our time charter fleet earned $38,800 per day during the same period, giving an average earnings of $40,100 per day for our VLCC fleet. We have to date booked 58% of our second quarter's spot capacity at $30,400 per day. We will now go through the income statement. We had a good quarter with TCE revenues of $70.7 million, EBITDA of $50.6 million and net income of $14.3 million equal to $0.15 per share. The net result includes a loss on sale of DHT Ann and DHT Phoenix, totaling $7.5 million. Adjusting for this, our net income was $21.8 million or $0.23 per share. We continue to allocate capital prudently. We have executed a clearly stated strategy of investing in our fleet, keeping leverage down and returning significant capital to shareholders. This strategy has enabled us to drive growth and pay cash dividends in now 29 consecutive quarters. For the first quarter, we will return $15.1 million to our shareholders, equating to 69% or a net income adjusted for the loss on sale of the two vessels. The return on capital is a combination of repurchasing $5 million worth of our convertible bond and $10.1 million in cash dividends or $0.08 per share. The dividends will be paid on May 31 to shareholders of record as on May 22. Our balance sheet remained strong, with interest-bearing debt to total assets at 48.4% based on book values and 54.6% is market-to-market. We have additional liquidity to revolving credit facility with $48.7 million available. As you can see, we have applied a total of $28.6 million towards ordinary repayments, repayments associated with the sale of DHT Chris and repurchase of convertible bonds. At this point, $180 million of the convertible bond is outstanding. And then I'll pass it over to Trygve.

Thank you, Svein. Let's talk about cash breakeven. As you've come to know, we at DHT are keenly focused on cash breakeven. And as we've highlighted before, when we talk about cash breakeven, we include all expected cash costs. Today, I'll focus on just two numbers. For DHT to go cash neutral in the second half of this year, we estimate that the spot VLCCs must earn $18,100 per day. For next year, the corresponding number is $20,400 per day. Very competitive and comfortable numbers in our own opinion. Cash breakeven is all about staying power and downside protection. So let us now switch gear and look to the upside. On this slide, we show the required rates needed for DHT to produce positive net income. So the main takeaway here is we will be profitable at VLCC spot rates in excess of $22,500 per day for the second half of 2017 and at $24,800 per day for 2018. And as you will recall, our capital allocation policy is to return minimum 60% of net income to shareholders. Let me then take a moment to address Frontline. As you know, over the past several months, we have made a number of proposals to acquire DHT. In fact, the last proposal they made on April 25 was unchanged from a previous proposal that our board had already rejected. We have attempted to engage in good faith with Frontline during multiple in-person and phone meetings to reach a starting point for a productive discussion. We explained that their proposals do not reflect the fundamental value inherent in our fleet and would in fact dilute the value of DHT shareholders' investments. Please allow me to be a bit specific. First, through our acquisition of the BW ships, we established DHT's NAV to $5.37 per share. Second, Frontline has proposed a business combination where they will issue 0.8 Frontline shares for each DHT share. Based on recently updated analyst reports, median NAV for Frontline is assessed to $5 per share. So in other words, they propose -- that they -- that we shall accept $4 of Frontline NAV in exchange for our own NAV of $5.37. Third, based on relative NAV contribution and estimated EBITDA contribution, DHT shareholders should get close to 50% of the combined entity, with a corresponding exchange ratio of better than 1:1 Frontline for DHT share. We're not against consolidation. In fact, we've been quite active on that front as you have seen. But any business combination needs to make sense to both parties. One of the reasons we're excited about our future is the strength of our fleet. With the BW transaction we announced in March, we are continuing to expand our fleet, while maintaining a strong balance sheet. Let me now take a moment to provide some additional color on this transaction and how it benefits us moving forward. As communicated on recent quarterly earnings calls, we believe this is the right time we'll decide who to expand their fleet. Values are down as a consequence of short-term concern related to OPEC production cuts and the pace on newbuildings being delivered into the fleet. However, the underlying demand picture looks robust to us. The world continues to create more oil every day and every year. And with that comes transportation needs. The pace of deliveries is decelerating, and importantly, the replacement needs are accelerating. So we are bullish on the medium-term outlook for tankers. In this regard, we are proud to have acquired the VLCC fleet of the BW Group in late March, consisting of nine vessels in the water and 2 in order with an aggregate value of $538 million. The deal was struck on the fair and balanced NAV-for-NAV basis. We issued DHT shares to BW at the price of $5.37, and once all the ships have been delivered, BW will become a 33.5% shareholder in DHT. And as Svein mentioned earlier, the cash portion of the consideration is financed by a syndicate of top-notch shipping banks on terms that harmonize with our focus in cash breakeven. With OpEx and debt service estimated to amount to $17,900 a day and only a very marginal increase in overall SG&A, the acquisition leads to a reduction in overall cash breakeven levels for DHT. Following this acquisition, we expect to reduce our G&A per ship per day by about 30%, and importantly, we expected yield to be quite accretive on earnings. The acquisition will also give us a markedly larger presence in VLCC markets. This is further enhanced when we take commercial management to BW's four newbuilds from Samsung that was part of a larger multi-ship type order that BW recently placed with the South Korean shipbuilder. We're very pleased to have been able to do this acquisition at this point in the cycle. Yes, over the past few years, discovered that BW and ourselves have a lot in common on how we regard a large tanker market and have both followed the strategy of customer focus, emphasizing good operations and moderate financial leverage. It has been a meeting of minds, and we are proud to now have BW as a large shareholder in DHT. And at this point, it may behoove us to emphasize that we have not given up control to BW. In fact, the governance arrangements we have in BW put our independent board in control for the benefit of all our shareholders as there are multiple limitations to BW rights. One, BW currently has one member on our board. They have the right to expand that to two, but will never have the majority of the board. Two, similarly, BW will never have majority representation on any board committee. Three, BW is committed to voting the stock bid received in this transaction in favor of DHT's directed nominees. Four, BW is subject to a rigorous standstill. Five, BW does have some veto rights over major transactions, but such rights are unusually limited for a shareholder of BW's size. And finally, all of these limitations were carefully crafted to ensure that DHT remains under active control of a strong independent board. So again, we're proud of this consolidating transaction. It is the right time to expand with issued equity and bulk-prevailing share price in a most cost-efficient manner. We have then one goal, increased our VLCC fleet by more than 50%. We've gotten the lead investor with a proud and impressive track record in the VLCC markets. And importantly, DHT remains under the active control of a strong independent board. Before we open the call to Q&A, I want to conclude by emphasizing that we are continuing to achieve strong operational results. We are executing on our countercyclical investment strategy to expand and renew our fleet. And we're continuing to allocate capital prudently in order to maintain balance sheet strength, and at the same time, return capital to shareholders. So with that, let's open the floor to Q&A. Operator?

[Operator Instructions] We will now take the first question from Jon Chappell from Evercore. Please go ahead.

Trygve, you just mentioned the -- just briefly, 4 VLCCs of BW had placed an order for, post the announcement of your acquisition or your merger. Can you just explain to us what the terms are as far as how those ships relate to DHT, rights of first refusal, any specific time frames where deposits would have to be placed, how do think about those four ships as the overall entity?

We have an agreement with BW that we will commercially manage these ships. So they will be under the DHT wings, but ownership remains with BW.

And that's in perpetuity. There's no purchase options or any chance of you getting ownership of those?

To the first part of your question, there is no purchase option. But that's not to say that it will never ever change hands. But we do not have first right of refusal or an option at fixed numbers or anything like that.

Okay. And then as it relates to the opportunities in liquidity, that's a pretty good financing terms you got for your own two VLCCs plus the BW transaction. What would you consider your current liquidity to be today to be opportunistic in the market? And then second of all, we're seeing kind of a little bit of strengthening in some recent transactions. I'm just wondering if that is the beginning of the signs of an inflection point. Or do you think that the market continues to kind of bounce along the bottom over the next several months, providing a window still for you to move forward?

I think that over the past several quarters and months, most analysts have been too bearish on the whole sector. They've been right that values have been coming off quite significantly. But the freight market has held up very nicely. And I think that's what's starting to dawn upon people that 2017 that most people thought was going to be a very depressed market, has at least started out quite respectively. And then people recognize that values are down to trough levels from the last trough. So maybe there are some embedded opportunities here, and we wholeheartedly agree with you, Jon, that there is signs suggesting that there is more buying interest out there. And I guess, there are some data points that are coming in just the last couple of days suggesting that the move seems to be upwards from where we are.

So in that vein then, window may be closing. I mean, obviously it's difficult to bottom tick, and they're still low by any recent standards. But to be able to move quickly, what would you say your available liquidity is today for further acquisitions?

I think this is going to echo what we responded last time that with the balance sheet we have today, we can do single ship acquisitions and the likes, but we cannot go out and do fleet acquisitions without issuing additional raised capital. So we think we're very comfortable, very strong with the fleet that we have. And quite frankly, we've taken the -- we've just taken a pretty big step in the -- on the expansion side. We couldn't repeat that again without raising equity, for sure.

Thank you. We will now take the next question from Spiro Dounis from UBS. Please go ahead.

Just kind of want to follow up on the growth side of things here. Just as you think about the next dollar you spend on growth, you've obviously bought some second-hand assets, you've also bought some newbuildings. I guess, you just gave a preference where you spend from valuation perspective on what looks more attractive. And when you think about obviously, very large VLCC player now diversifying away from that, are there other tanker sectors you think you'd look at here?

The liquidity in general is rather painful for second-hand ships. And for us, the focus is really value. Obviously, in January, we felt that newbuildings was the way to go. We got those two orders placed at very effective terms. The BW transaction was based on the prevailing broker values towards the end of March, so also at values that we think are good. We are a tanker company, and we have a couple of Afras. We used to have Suezmaxes. So we will not preclude from being involved in those sectors. But I think it's fair to say that our focus is very much on the VLCC space. And that's where we think the better economics are. We are still bullish on the long-haul transportation needs. And that's really also where the VLCCs will be the workhorses.

Got it. Okay, that's clear. And you mentioned those two Aframaxes that you have. I think those recently came off chart, or I believe you were looking to be maybe extend those, I think, was the ideal outcome. Just curious where do those stand right now?

We don't really think that this is the market to enter into long-term charters. So we are operating them on shorter-term charters. So we are operating them on shorter-term charters for now and continue to do that until we think it's the right time to entertain longer-term income. Alternatively also, sell them at some point, but we are in no rush to do that. These are two quality ships, very attractive design. So they will stay with us for a while longer.

Thank you. We will now take the next question from Herman Hildan from Clarkson Plateau. Please go ahead.

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I'm not sure we understood that question, Herman. If you can rephrase and repeat?

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As you noted, we expanded our board by one additional director recently, and that is the BW Group representative, Carsten Mortensen. And the most recent Frontline proposal was considered over some time by the board, including BW's director. And the response that was sent on Sunday to Frontline was unanimous agreement by our board in response to Frontline.

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As far as we noted, Paddy is the last one to order, at least for today.

I think it's recognized that early this year, end of last year, there are kind of hungry for new business. And the big [indiscernible], they had a rather aggressive marketing campaign early this year. And they made some, call it, sweet deals for some long-term customers, us included. But they have recently really cooled that off and are increasing their prices. So there is appreciating trend, so to speak, on the cost of ordering a newbuilding. I think also people should take note of who are ordering. There is some highly respected private companies and that's been in this new game for a long time that they place each ship to orders for two or four ships. And they think this is really a good time to invest. And it seems to us that most of these guys that you would call the usual suspects for such activity have now made it almost to the business. So we don't think this is, call it, a linear trend. You'll the same activity through the rest of the year. So I think it's going to quiet down a bit.

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Yes, that's correct.

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Thank you. We will now take the next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

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As I think, as we highlighted on the BW transaction, by increasing our VLCC fleet from 20 to 30, of course, capacity increases dramatically, but we only have to add a limited number of people on our shoreside staff. So there's definitely cost synergies in that expansion that we did. And similarly, when we acquired Samco three years ago, we also realized cost synergies. So I think in most business combinations, there will be some cost synergies. But of course, as you get larger, it becomes perhaps a bit more marginal. So that is the general observation. And I think you see what the Frontline's viewpoint is that there there's been no recognition of our very fundamental objections to their proposal, namely that our NAV contribution and our EBITDA contribution suggested far better exchange ratio than what they proposed. So that's really the stumbling block. It's not about synergy on the cost side.

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We're not going to stand in way for a business combination that make sense for our shareholders of both sides, but it needs to be fair balance and it needs to make sense to both sides. And so far, they have failed to recognize the importance of that.

I want to go to the newbuilding front. We have seen a number of newbuilds this year. I understand that you believe that there are not going to be not many. But I was wondering, based on your supply-demand estimates based on whether you see trade developing and the certain scenarios that you have in your mind, how many new buildings that we need in order to the replace the existing vessels that are above a certain age and that have come to scrapping and to certain additional demand that is going to come from incremental oil supply?

-: And we have an OPEC just then closing the taps, as you've seen recently, then all these refineries in Asia turning their focus to the Atlantic. And this is adding on to transportation. And I think they are not willing to rely entirely on OPEC as well. They want to diversify their supply base. And you see that all along where they enter into long-term supply agreements or they invest in hydrocarbons to secure supply and all of that. So we think this picture looks pretty good. If you look at China, in particular, you would expect China over the next four years to add some 4 million barrels a day of refining capacity. And although the bulk of that looks to come in '19 and '20, there's a steady expansion. And that combined with their dwindling domestic oil production, it's also set for healthy demand for our services. So through our actions, I think you can say that in the medium term, we are quite bullish.

Can you also comment about concerns that there are about the increasing U.S. production, particularly the Permian? And how does this impact the demand picture for VLCCs? If OPEC extends the cut for much longer than expected and we go through 2018 with OPEC having reduced production, what will be the consequences for your supply-demand outlook, especially given the increase of very recent newbuilding orders?

I think your first part there on the increase in domestic production in United States, this of course now is quite different than two years ago, because now you're allowed to export. And so far, only indicators are that the incremental production is going to lead U.S. exports, which is a new thing. And I think, again, it has proven the so-called experts wrong, because this crude is really finding new homes all over the world. It's not only to Europe that most people are pointing to before they are starting to develop. So it's interesting. OPEC is cutting back, but this main supplier than being in the Atlantic Basin and they are adding two months as we speak. It seems that the U.S. producers are both able and willing to be competitive.

Thank you. We will now take the next question from Rob Silvera from R.E. Silvera & Associates Marine Surveyors.

First of all, I'd like to complement you on doing a great job in this last quarter, especially when you're dealing with all the distractions of Frontline. Obviously, Frontline sees great value in you because of what their approach was and what they were trying to get for a very insignificant price as far as I'm concerned, and so did BW. As you pointed out, BW did a deal with you based on hard assets for ownership of your stock, money and ships and value very fairly at $5.37, as you said. I would like to comment as a group that holds over 58,000 shares of DHT that if this deal were to go through even at a premium to where it is today based on 100% stock, as soon as it's done, the value is subject to change. Dilution could make that change a big change, especially to the downside. So we can never really know in advance just what value we would be getting when it's 100% stock-based. You'd have to hedge and a lot of people don't know how to do those kind of things. Anyhow, another issue, and I think this one looks to the future of a merger type of structure. And that is the debt management history for Frontline. And its management is what I would consider terrible witness, not only the earlier Frontline and what it went through, but also Seadrill, which has become virtually a penny stock. So in my opinion, even if they increase the offer of stock and try to continue with a merger and control, my answer would be an emphatic no, and I hope you guys will stick to that. I like what you've done. I'm very proud of what you've done. And I recommended you to many friends. So that's my input I don't have any real specific questions. I just am commenting really this time around as a over 58,000 shareholder.

Thank you, sir. We appreciate your viewpoints. And I think actually you speak for a lot more than 58,000 shares in order to just voice. So thank you very much.

We have also a lot of incoming calls on the same matter, and we experienced strong support from investors, in United States in particular, for our efforts. So thank you very much for your encouragement.

Thank you. We will now take the next question from Michael Webber from Wells Fargo. Please go ahead.

That endorsement will be a tough to follow, but just a couple of questions. And I don't want to oversimplify things here, but it's a little bit unclear as to whether, I guess, in the most recent volley of offers and rebuttals with Frontline, have you guys been able to actually have a direct dialogue with them, either in person or on the phone, kind of beyond what we would see via letters in either direction?

In the past, we have met with Frontline management several times and also spoke with them over the phone several times. So there's been a number of engagements, so to speak.

And in the past, would that be within, say, 2017?

Yes. And also in '16.

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Repeating what we just said that with the total disregard for the underlying inherent value in the DHT fleet and our EBITDA contribution and what appears to be a Frontline so focused on market cap in developing the exchange offer. It's a dead-end street. We're not going to get anywhere with that. So we think that yes, they have a premium and we hear that people are arguing there's reasons why they are on their premium. But if we were to accept the premium currency, we only get the downside for having a premium. We don't get any upside. So I think that's an important factor as well.

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We're not going to comment specifically on that point. I think you'd appreciate that.

Thank you. We will now take the next question from Noah Parquette from JPMorgan. Please go ahead.

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Thank you. [Operator Instructions] We will now take the next question from James Jang from Maxim Group.

James?

A question. You guys sold the DHT Ann [indiscernible]. Are you guys possible looking to sell those vessels once the new vessels are deliver? Or are you comfortable carrying...

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And you guys mentioned the aggressive marketing by the Korean yards in the beginning of the year. I don't know how much contact you have with the yards. But have you seen that aggressive pricing continue or are they pulling back some now?

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There are no further questions in the queue at this time.

Okay. Then it remains for us just to say thank you to everybody for continued support of DHT and your interest in our earnings for the first quarter 2017. Thank you very much.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.