DHT Holdings Inc
NYSE:DHT

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DHT Holdings Inc
NYSE:DHT
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Earnings Call Transcript

Earnings Call Transcript
2021-Q3

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L
Laila Halvorsen
CFO

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’s 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 10th. 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 repayment; the outlook for the tanker market in general; daily charter high rates and vessel utilization; forecasts of world economic activity; oil prices and oil trading patterns; anticipated levels of new buildings and scrapping; and projected drydock 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 results include the 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 continues to show a very good cost control. OpEx for the quarter, 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 quarter 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 nine months of 2021 amounted to $22,400 per day.

For the fourth quarter, we have booked income for 70% of the fleet at an average rate of $20,700 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 quarter ended with $64.5 million of cash. At quarter-end, the Company’s availability under both revolving credit facilities was $180.5 million, putting total liquidity at $245 million as of September 30th.

Financial leverage is about 30% based on market values for the ships. And net debt per vessel was $17.7 million at quarter-end, which is well below current scrap value.

Looking at the cash bridge. The quarter 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 dividends payment and $2 million was used for maintenance and scrubber CapEx. Changes in working capital amounted to $11 million. Proceeds from sales of vessel were $30 million. And the quarter ended with $64.5 million of cash.

The change in working capital for the quarter is mainly a result of vessels on time charter being redelivered and bunkers being purchased back from charterers.

And 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 this share buyback, the Company will pay a dividend of $0.02 per share for the quarter. It will be payable on the 23rd of November to shareholders of record as of 16th of November. And 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.

S
Svein Moxnes Harfjeld
Co-CEO

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 quarter. 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 the 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 half of 2022 for the Company to be cash neutral.

This is the DHT way, a robust structure to protect the downside, without giving a way to upside.

Then, we’ll discuss our Dry Docking Program. Continuing our efforts from the two prior quarters, we have again taken advantage of the weak spot market to bring forward drydocks.

During the third quarter, we recorded 85 off-hire days in connection with drydocks. We expect another 100 to 125 days during four quarter. The most recent and current drydocks 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 drydock, they are typically handicapped in the spot market for the 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 three quarters, we’ve capitalized $33 million in for drydock’s installation of scrubbers on ballast water treatment ecosystems.

Our team is doing great efforts, and we will by year-end have drydock 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 three sips scheduled for drydocks.

The way we’re positioning the Company is a reflection of our constructive view on the markets. 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 level, 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 $1.78 per share these. This reduced operational leverage and significant upside that we have put in place.

So, 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 the mark to market basis. We have a consistent and what we believe to be a well-designed strategy and matched with a proven ability to manage the business cycles. We introduced our capital allocation policy from the second quarter 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 is at a measured pace with elements in the oil market that drives our constructive view. These elements are one, the recovery in the global oil demand post the COVID shock, in particular related to increased mobility; two, crude oil inventories having been brought down to pre-COVID levels; and three, OPEC+ responding with additional barrels to the markets. The positive dynamics can, amongst others, be led to improved refining margins. So, we think we are in great ship and shape and are attuned for recovery.

And with that, we open up for Q&A. Operator?

Operator

Thank you. [Operator Instructions] Our first question today comes from the line of Randy Giveans of Jefferies. Please go ahead. Your line is now open.

R
Randy Giveans
Jefferies

Hi, team DHT. How’s it going?

S
Svein Moxnes Harfjeld
Co-CEO

Great. How is Texas?

R
Randy Giveans
Jefferies

All is well, despite the Astros last night. But, that’s okay. So, I guess, looking at slide six, you returned a little over $10 million to shareholders, right? And that’s despite negative earnings in 2Q, and obviously 3Q now. How is that amount decided on? And secondly, for the share repurchases, it looks like you repurchased almost $7 million there. So, how was that amount determined? And was that just a result of shares trading well below NAV at the time?

S
Svein Moxnes Harfjeld
Co-CEO

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. And lastly, we are price sensitive. And then, this is what we thought we could meaningfully do at the time when the shares were trading at these levels. And we are very happy that we had that opportunity. The amount is somewhat less than what we did in the prior quarter. But I think, also now, everyone should not expect us to continue these buybacks that the shares are now trading in line with NAV more or less.

R
Randy Giveans
Jefferies

Got it. Yes. No, that was my follow-up there, so. But, the $0.02 dividend, that’s really the expectation now until you get more meaningful profitability?

S
Svein Moxnes Harfjeld
Co-CEO

As you all know, we have a capital allocation policy of returning minimum 60% from ordinary net income to shareholders. And we have a history of paying $0.02, so that we reprinted red numbers. And then, assuming now that’s the recovery that several people expect to be in front of us, so then of course there is a potential for paying more than $0.02 by applying this formula.

R
Randy Giveans
Jefferies

Okay. And then second question, looking at your fleet, you’ve obviously gotten rid of your older ships now with the Condor sale complete. How is your fleet currently? Is there any appetite for maybe some charter-ins or secondhand acquisitions? Or at this point, with your rolling off time charters, are you pretty happy with your current kind of operational exposure into what should be a better market in 2022?

S
Svein Moxnes Harfjeld
Co-CEO

So firstly, we are not planning to sell additional ships at this side of the recovery. We spent a lot of time and effort now in drydocking ships as you’ve seen and getting these ships ready for different earning environment. That’s what we’ve experienced this year. But, 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 three young ships, five-year old eco-ships with scrubbers earlier this year, and we expect to sort of try to acquire more, but the prices, appreciate too quickly frankly. So, we felt that levels became too high to buy ships. So, we decided to take a step back. And at the prices, modern ships are sort of held up. So, you should not expect us to acquire more and more ships at this points.

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 100% financing on assets, whether it’s short period or longer period. And it will also disturb our cash breakeven focus. It will certainly increase that meaningfully, if you were to do that. And lastly, when you time charter ships, you’re not in control of the technical management and the vetting system on the ships. And that’s something which is very important for us in serving our customers that we are in full control on what we do on asset side and with the crew and everything. So, that’s not in the carts.

R
Randy Giveans
Jefferies

Got it. Well, that makes sense. Thanks and good to see VLCC rates getting some light there. So, hopefully that continues. Thanks again.

Operator

Your next question today comes from the line of Jon Chappell of Evercore ISI. Please ask a question.

J
Jon Chappell
Evercore ISI

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 quarter. And I understand nobody wants to reup 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 to 12 months? And what are the current levels out there, if any, relative to the spot market today?

S
Svein Moxnes Harfjeld
Co-CEO

Yes. That’s a good question, Jon. The short-term time charters are not very different from the spot market, on the longer voyages. So, today, equal scrubber ship will earn, say 20,000 plus minus for the long voyages, and these short-term charters are priced at a marginal premium to that. But, we think optionality that we 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 similar ships, you could do that in the low-30,000s, maybe 33, 34, 35 and something like that. So, that is certainly improved a bit. And I guess, it’s a reflection over some of these clients seeing what is ahead, and they want to have some ships in their portfolios. We’re not chasing down these opportunities, but we do have some core customers that might have an interest and extend some of these charters that are coming off. So, we will have to look at those transactions when the time is right and when they’re closer to expire all those charters. But, we are a transportation service company. It’s important to have some core customers that to do repeat business with and so forth. So, let’s see, but that is something we typically do. We had -- I don’t know, lot in the past actually.

J
Jon Chappell
Evercore ISI

Okay. I mean, 33 to 35 for that period, and 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. And 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 quarter we talk about how things are going to get better and the fundamentals are improving. But, the next quarter is still going to be terrible. And that’s both you and me. I’ve been expecting 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 going to hit an inflection point where the market improves, not just off current levels, but meaningfully off current levels to warrant maintaining the spot exposure into next year.

S
Svein Moxnes Harfjeld
Co-CEO

I think, we’ve been a bit more modest in our market expectations than maybe most others. And 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. So, of course, the COVID shock was brutal. And we’re not yet back at oil consumption levels that we were pre-COVID. And 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. And during this period, we have seen the fleet grow. So, we have more ships today than what we had just pre-COVID. So, there is an imbalance in that market, and scrapping has been very, very quiet as a lot of these older ships have been engaged in a bit more sort of shadier trades.

So 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 off the storage, but we see some of the owners of these ships buying sort of slightly less old ships, if you like, to replace those storage units. So, there is a little bit of refinement going on, but is not enough yet. So, we look at this whole recovery as a bit of a slow moving train out of the station. And, we still think sort of some are right, but there’s no X factors in so far that is getting any sort of trouble through to the recovery.

You could, of course, have lifting of sanctions. We think that would change the game quite dramatically actually, if Iran comes back in a full extent, but those -- expected them to be back in the second quarter of this year. And I guess, the bears on Iran are into looking into next summer. So, I’m in no better position to view that, but that is a potential sort of event that might change things quite a lot.

Operator

Your next question today comes from the line of Omar Nokta from Clarksons Securities. Please go ahead.

O
Omar Nokta
Clarksons Securities

Hey, Svein. Yes. I just wanted to follow-up on the discussion of Jon. You do definitely sound quite a bit more constructive on next year, and definitely more than how you sounded three months ago. I think you mentioned that you -- DHT felt the recovery was going to take longer than most people anticipate. Maybe just on that discussion here, wanted to gauge, perhaps if you let me, your level of constructiveness all else being equal because there’s always going to be something that changes, but the current plan with OPEC+ adding 400,000 barrels a month -- a day each month up until September, October of next year. When we think of a recovery, again, all else equal, do you think we could start to see a recovery happening sooner than the tail end of the production addition, or could it happen -- or do we have to wait until basically next fall for real recovery? Any color you can give…

S
Svein Moxnes Harfjeld
Co-CEO

I think, as I’ve commented, the recovery so far is measured and we expect it to continue to be measured for a little while, longer. But, we now have for modern ships in the spot market, 20,000, maybe plus even. And at this pace, you will have sort of profitable levels coming out, not too far out. But, there are some sort of 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 the gas is also used by refineries to decentralize the crude that they consume. And as the gas is not very expensive, refiners are looking to buy more light suite to avoid the sort of medium to heavier sour stuff and use gas. And this type of oil is predominantly being loaded from Atlantic. So, you see maybe some ton mileage expansion now just in sort of compared to what we have seen in the last 12 to 24 months. This is maybe a smaller item, but it is really all those things that we need, right, to sort of push the needle in the right direction.

O
Omar Nokta
Clarksons Securities

Okay. Yes. Thanks for that. Because I did want to follow up, and I think you answered that to some extent. I was going to see if you have noticed from your vantage point if charters perhaps were acting any differently, especially with high energy prices and inventory is continuing to come off, especially with us approaching winter. I was going to see if you have seen any noticeable changes, whether they’re looking to take ships on charter, as Jon 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?

S
Svein Moxnes Harfjeld
Co-CEO

There’s definitely more interest on the time charter front. So, that’s for real, and I think that’s the reflection of whether it’s being in its traders or real end users. So, they would like to have ships, so they need to have ships. And this is I think simply a reflection of their view of the market and the expected activity that they will have. So, that’s definitely happening. So, I think that’s sort of a leading indicator, if you like.

The overhang of ships has reduced quite dramatically these last few months after OPEC started to add barrels. So, 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 sweet time when the overhang was much greater. So, there is a change in all this dynamic. But, 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’ll get some attraction on rates.

O
Omar Nokta
Clarksons Securities

Yes. Very good. I’ll keep our eyes open for that tipping point. Thanks, Svein.

Operator

Thank you. Your next question today comes from the line of Magnus Fyhr of H.C. Wainwright. Please ask your question.

M
Magnus Fyhr
H.C. Wainwright

Yes. Thank you. Good afternoon. Just a follow-up question on the market sentiment. You mentioned that you would entertain some time charter from some of the key customers. Time charter coverage has been as high as 50% in the last 12 months. Is there any preferred level going forward as far as seeking? I mean, I guess we believe that the market probably has hit the bottom and we should recover going forward. Is there a preferred level to keep this lead from spot to maintain the upfront, or how would you structure some of those contracts and perhaps…

S
Svein Moxnes Harfjeld
Co-CEO

We are simple business guys, right? So, we look at the moment. So, 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 has really been very exciting. So, I think you should expect that once rates are sort of at meaningful levels, again, depending a little bit on the trajectory of the general stock market, but then we will certainly seek to increase our coverage again. There’s no fixed percentage. And you have to keep in mind that time charter market for large -- the liquidity is rather thin, is not that much business, if you look on their feet as a whole. So, hence, it’s important to have customers in your sort of portfolio that do engage in time charters and where you have the opportunity to do some repeat business and so forth. And we feel we are in that camp. So, once we see meaningful margin, we will seek to engage again.

M
Magnus Fyhr
H.C. Wainwright

All right. Thank you. And just one question on the drydocking. You mentioned you have three ships going into drydock next year. Any thoughts -- or what’s the -- can you move them up or what -- how is your thinking there of when you want to do them?

S
Svein Moxnes Harfjeld
Co-CEO

So, the plan on the schedule is one, for the first half and two, in, I think, the third quarter. So, it could be that we, for some reason, have an opportunity to bring them forward, depending a bit on the market and all of that and yard capacity and equipment’s going to be delivered and so forth. But, that’s a tentative schedule.

M
Magnus Fyhr
H.C. Wainwright

I guess, one final question, just on the cost side, with -- have you seen any changes here? You mentioned that there’s an increase in time for drydocks. But in general, as far as the daily OpEx, you see that kind of normalizing here, or are you seeing potentially more cost for COVID-related expenses?

S
Svein Moxnes Harfjeld
Co-CEO

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, so. And this crew change story is still a very big challenge for the industry. I think, every ship owner has got a crew that is staying on board longer than originally -- normally planned or have to take some time and deviations into ports for crew changes is possible, and it depends on nationality. So, it’s still a very, very difficult task. And hats off to the guys we have that are running, are crewing. So, there’s marginal cost. But, as you see, Laila addressed, we have 7,800 year-to-date on our OpEx side. And that includes all the overhead cost of the shore-based staff as well related on the technical department essentially. So, I think, that’s still a very good number.

M
Magnus Fyhr
H.C. Wainwright

No, I agree. Thank you for the flavor though. So, thank you. That’s all I have.

Operator

Thank you. Your next question today comes from the line of Ben Nolan of Stifel. Please go ahead.

B
Ben Nolan
Stifel

Really, I just have one question, and it relates to sort of some of the noise that’s been going on in the market, obviously. Two of your competitors in the VLCC side have been -- or there’s been some noise about potential consolidation. I’m curious, 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? And are you at all interested in that or more sort of a curious observer from afar?

S
Svein Moxnes Harfjeld
Co-CEO

We think from a sort of industrial perspective, we are certainly big enough. None of our customers are chasing us for more ships or 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, we are financing ourselves at equal or maybe better terms even than companies that are our size or even larger. I think, in the equity markets, we are -- our stock is relative to underlying values. It’s trading better than some of our bigger competitors. So, we are not sort of sold on this idea that size is going to change all of this. We tend to talk a bit that the noise on consolidation is mostly driven by bankers, who want to earn some fees on this. So, not necessarily the shareholders. And 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 trying to quantify what the economics of that can be. You might have some benefits on G&A because if you are even bigger -- you can be a little bit more efficient, but that’s not the big item on the P&L line in the shipping companies. There are other things that are more important, so. But, that being said, I think we’ve demonstrated in the past, as you alluded to, that we acquired some Samco Shipholding in 2014, we acquired a BW fleet in ‘17. So, we are always open to what can be good opportunities and will be a good transaction for the shareholders of DHT.

B
Ben Nolan
Stifel

Okay. That is helpful and straightforward. And incidentally, I -- you guys are always helpful and straightforward and don’t make things relatively easy for us. So, I appreciate that. Thanks.

Operator

Thank you. We do have one more question at this time. [Operator Instructions] Your next question comes from the line of Robert Silvera, Marine Surveyors. Please ask your question.

R
Robert Silvera
Marine Surveyors

Hi. 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?

S
Svein Moxnes Harfjeld
Co-CEO

Well, I think, our actions in the past to do prepayments of debt to strengthen the balance sheet was, of course, a result of rewarding markets. And when we allocate capital, a good portion of it will go to the shareholders. We will then use the other portion to either invest when the time has been right or to reduce debt. And 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 the Company to have as strong as balance sheet that you can have and maybe even lower debt per ship than what we have today, to give you even more flexibility. So, I think, that should be expected. Yes.

R
Robert Silvera
Marine Surveyors

Wonderful. Yes, 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, and I noticed that you’ve built up quite a bit of your consumable inventory. Was that because -- and that’s fuels, et cetera, was that because of a lesser rate of business or because you anticipated the rise in oil prices and scrolled away some additional inventory?

S
Svein Moxnes Harfjeld
Co-CEO

That’s a very good observation, sir. So, what it is? It’s essentially bunkers. And 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 to ship to us. We have to acquire. And this impacts then the inventory or the working capital in the Company. So, when we had much more spot exposure and the oil prices -- it will also be oil price sensitive, of course, this will vary. But we do not speculate on bunkers. You 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 world scale and the bunker cost is sort of included in that. And it’s a very good correlation between that and the freight levels. So, we only buy bunkers when we fix the ship. So, not in sort of a speculative way or we don’t -- and we also don’t hedge bunkers.

R
Robert Silvera
Marine Surveyors

Okay. Well, you ended up doing a real good job because it’s nice to have that extra, while the prices of oil have grown over $80 a barrel. Thank you. That’s all my questions. Congratulations on doing a real great job, especially continuing to reduce the debt.

S
Svein Moxnes Harfjeld
Co-CEO

Thank you, sir. Wishing you a good day.

Operator

Your next question today comes from the line of Chris Tsung of Webber Research. Please go ahead.

C
Chris Tsung
Webber Research

I apologize for asking if somebody asked earlier, I got dropped off the queue, or the call rather. But, were you guys able to break out the amount based on the spot for Q4 and what the rates were?

S
Svein Moxnes Harfjeld
Co-CEO

We can do that for you. So, for the Q4, it’s 59% at $13,700 per day.

C
Chris Tsung
Webber Research

Thank you. And I see it in your press release, the $300 million from DNK for insurance. Can you -- what this is for? And how much we should anticipate for with building tax, what the rough ranges would be?

S
Svein Moxnes Harfjeld
Co-CEO

So, this is sort of a mutual club, right? And they build up a capital base that belongs to its members. And the club has decided that part of this capital should be then returned to its owners, if you like. So, it’s a capital reduction in the units, and we will be entitled to an amount in the range of $5.50 million to $6.5 million. We expect that to be received in the first quarter next year. So, we don’t think 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. So, don’t unrest us on the exact number, but it could be in that range.

C
Chris Tsung
Webber Research

Yes. No, I understand. That’s super helpful color. And I guess, this is like just a onetime payout. We shouldn’t expect this again anytime soon?

S
Svein Moxnes Harfjeld
Co-CEO

That’s correct.

C
Chris Tsung
Webber Research

Cool. And lastly, for the drydocking program, it looks like it’s about $3 million or so CapEx per vessel. Is that a good run rate for the 3 in Q4 and 3 in 2022?

S
Svein Moxnes Harfjeld
Co-CEO

I think, you can follow-up offline with Wilhelm on that. So, the ships next year are a bit different vintage. There is less sort of equipment installation and stuff like that. So, feel free to follow-up directly with him.

C
Chris Tsung
Webber Research

Okay. Yes, we’ll do. Thank you so much. That’s it for me.

Operator

Thank you. [Operator Instructions] This comes from the line of Michael Moscow [ph] of MRM. Please go ahead.

U
Unidentified Analyst

I appreciate it. Can you elaborate -- two things. Can you elaborate on, when you said if they lift sanctions that could change the landscape in what manner? And then, the other thing is, I was on a Capital Line 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-plus, based on basically some of the things you noted in your press release. So, I’d love to know what your thought is on that, too. Thank you.

S
Svein Moxnes Harfjeld
Co-CEO

So to your first question, today, Iran is selling a part of their oil sort of under the embargo regime. So, they have to sell it at a discounted price, and they have to use ships that are willing to trade embargo oil, and they have to pay a premium for those ships. So, these are the old banners, if you like, that are involved in this trade. The moment sanctions -- if sanctions get lifted, then that oil will be traded in the market at market prices. And they will have access to freight at market prices. So, we think these older ships that are involved in that trade, and they will then -- because they have been in sanctioned trade, they will be out of business. And that oil will then benefit the rest of the fleet, which is a sort of the normal fleet, if you like. And the older ships, we think will then disappear from the scene. So, the net benefit of that is smaller fleet and more oil in the market. That’s why we think this is a potentially good event.

On your second question, I’ve been in this game for 30 years, and I am not prepared to give you that number.

U
Unidentified Analyst

You’re hesitant to give the number.

S
Svein Moxnes Harfjeld
Co-CEO

I will not provide a number. But, when we sort of give out these opinions on direction of the market, that is a genuine belief. So, let’s see how it will play out.

U
Unidentified Analyst

Okay. I appreciate it. Thank you so much.

S
Svein Moxnes Harfjeld
Co-CEO

Thank you.

Operator

Thank you. It appears there are no further questions at this time. Svein, back to you.

S
Svein Moxnes Harfjeld
Co-CEO

Thank you very much to everyone for staying tuned on DHT, and wishing you all a good day ahead. Take care.

Operator

That does conclude our conference for today. Thank you all for participating. You may now disconnect.