DHT Maritime (DHT) Q3 2021 Earnings Call Transcript

DHT Maritime (DHT -0.62%)
Q3 2021 Earnings Call
Nov 03, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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. [Operator instructions] I must advise that this conference is being recorded today on Wednesday, November 3, 2021.

With us on our conference call today we have Svein Harfjeld, Co-CEOs; and Laila Halvorsen, CFO. And now without any further delay let me hand you over to Laila Halvorsen. Please go ahead. 

Laila Halvorsen -- Chief Financial Officer

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 question. 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 repurchase, and some debt repayments.

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 level 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 will know in the historically weak type of 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 continues to show very good cost control. Opex for the quarter came in at $19.2 million equal to $8,000 per day while the 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. 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 ship and net debt per vessel was $17.7 million at quarter-end, which is well below the 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 repayments 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 corporate capex. Changes in working capital amounted to $11 million.

Proceeds from sales of the 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 a return 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 $0.2 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 buybacks. With that, I will turn the call over to Svein. 

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you, Laila. Here on this slide, we will offer an update on our cash break-even levels. On the graph to the left, you see our cash break-even levels for the fourth quarter. The full fleet needs to generate $15,800 per day and a spot fleet of $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 half 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. Then we'll discuss our Dry Docking program. Continuing our efforts in the two prior quarters, we have again taken advantage of the weak spot market to bring forward drive-ups.

During the third quarter, we recorded 85 off-hire days in connection with drydocks. We expect another 100 to 125 days during the fourth 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 have tightened resulting in additional waiting time. Additionally, when vessels come off the drydock, they are typically handicapped in the spot market for their first voyage and have to offer discounts and possibly encounter waiting times to commence trading.

Hence our export earnings, these last quarters were negatively impacted. For the first three quarters, we have capitalized $33 million in full drydocks, installation of scrubbers, and ballast water treatment systems. Our team is doing a great effort and even by year-end have dried up 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 ships scheduled for drydocks.

The way they are positioning the company is a reflection or a constructive view of the market. On the left-hand side, they 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 grade 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. This reveals the operational leverage and significant upside that we have put in place. So as to round 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-design strategy and matched with a proven ability to manage the business cycles. We introduce our capital-allocation policy from the second quarter of 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 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-plus responding with additional barrels to the markets. The positive dynamics can, among others, be led to improved refining margins.

So, we think we are in great ship and shape and are attuned to recovery. And with that, we open up for Q&A, operator.

Questions & Answers:

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.

Randy Giveans -- Jefferies -- Analyst

Hi, team DHT. How's it going?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Going great. How is Texas?

Randy Giveans -- Jefferies -- Analyst

All is well, despite the Astros last night. But, that's OK. So, I guess looking at Slide 6, you returned a little over $10 million to shareholders, right and that's despite negative earnings in 2Q and obviously 3Q now. How was that amount decided on? And secondly, for the share repurchases, it looks like you repurchase almost $7 million there.

So how is that amount determined and was that just a result of shares trading well below NAV at the time?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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 on how we can buy back our stocks in the market. And then lastly, we are price sensitive. So and then this is what we felt we could meaningfully do at the time and when the shares were trading at these levels and we are very happy that we have that opportunity.

That amount is somewhat less than what we did in the prior quarter. But I think also not everyone should not expect us to continue these buybacks as the shares are now trading in line with NAV more or less.

Randy Giveans -- Jefferies -- Analyst

Got it. Yup. No, that was my follow-up there. So but the $0.2 dividend that's really the expectation now until you get more meaningful profitability.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

As you all know, we have a cap allocation policy of returning a minimum of 60% of 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 the recovery that several people expect to be in front of us then, of course, there is a potential for paying more than $0.2 by applying this to be this formula.

Randy Giveans -- Jefferies -- Analyst

OK. And then the second question, 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 ends or second-hand 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?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

So 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 the drydocking ships as you've seen and getting these ships ready for four different earning environments that what we've experienced this year. So that 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 were set to sort of try to acquire more.

But the prices appreciate that too quickly, frankly. So we felt that levels became too high to buy ships. So we decided to take a step back. And then, as the process of modern ships that 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 100% financing unless it were just a short period or longer period. And it will sort of disturb our cash break-even focus.

It will certainly increase that meaningfully if you were to do that. And lastly, when you time charter ships and 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 of what to do on the asset side and the crew and everything. So that's not in there and that's not in that we're not going to be in the carts.

Randy Giveans -- Jefferies -- Analyst

Got it. Well, that makes sense. Thanks and good to see VLCC rates getting some life here. So hopefully that continue.

Thanks again. 

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you. Fingers crossed still.

Operator

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

Jon Chappell -- Evercore ISI -- Analyst

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 is taking longer than anyone expected. What's the ability in the market right now for maybe shorter term-charters six to 12 months. And what are the current levels out there if any relative to the spot market today?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Yeah. That's a good question, Jon. The short-term time charters are not very different from the spot market and 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 the marginal premium to that, but we think the optionality that you give away or lose by doing those charters that they don't really make much sense to us.

For a 12 or 24 year month of charter for a similar ship, you could do that in the low-30,000s, maybe 33, 34, 35, and something like that. So that has certainly improved a bit and I guess it's a reflection of some of these clients seeing what is ahead of that 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 any interest in extending some of these charters that are coming off so we will have to look at those transactions when the time is right when they're close to expiring all those charters. But then we are a transportation service company, it's important to have some core customers that you do repeat business with and so forth.

So let's see. But that is something we typically do and we have done a lot of quite in the past actually so.

Jon Chappell -- Evercore ISI -- Analyst

OK. I mean 33 to 35 for that period and given the fact that the recovery lasting is taking a lot longer than anyone would've 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. This 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's still going to be terrible and that's both you and me have been expecting a bit of 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 of current levels, but meaningfully off current levels to warrant maintaining the spot exposure into next year?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Sure. I think we've been a bit more modest in our market expectations and 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 so brutal and we're not getting back at the oil consumption levels that we were pre-COVID. And if you look at sort of leading agencies are forecasting we have to wait until the 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 the scrapping has been very, very quiet. There's a lot of these older ships have been engaged in that bit more sort of shadier traits.

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 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. So there is a little bit of retirement going on but there's not enough yet. So we look at this whole recovery as a bit of a slow-moving train out of the station and then we still think sort of the fundamentals are right.

But there are no  X factors in -- so far that is getting in is sort of terrible to recovery. You could, of course, have a lifting of sanctions. We think that the change to gain quite dramatically actually if Iran comes back in the full extent. But those -- expected them to be back in the second quarter of this year.

And I guess the bears on Iran are looking into next summer. So I'm in no better position to view that but that is a potential sort of event that can change things to quite a lot.

Jon Chappell -- Evercore ISI -- Analyst

Thank you, Svein.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Sure.

Operator

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

Omar Nokta -- Clarkson Securities -- Analyst

Thank you. Hey, Svein, yeah. I just want to follow up on the discussion with 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.

and maybe just on that discussion here you want to gauge perhaps if you let me your level of constructiveness all else being equal there's always going to be something that changes, but the current plan with OPEC plus adding 400,000 barrels a day each month for up until September, October of next year. When we think of recovery -- out again 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 next fall for a real recovery? Any color to that thought?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

I think I just comment that recovery so far is measured and we expected to continue to be measured for a little while longer, but we are now at for modern ships in the spot market 20,000 maybe plus even. So at this pace, you will have sort of profitable levels coming up not too far out. There are some sort of the smaller things happening in the market that will have an impact beyond just OPEC plus adding barrels. I guess is you and most people have seen their 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 gas is now very expensive. Refineries are looking to buy more light suites and to avoid that sort of medium to heavier sour stuff and use gas. And this type of oil is predominantly being loaded from the Atlantic. So you see maybe some ton mileage expansion now just the into compared to what we have seen in the last 12 to 24 months.

This is maybe a smaller item that is really all those things that we need. Right, to sort of push the needle in the right direction.

Omar Nokta -- Clarkson Securities -- Analyst

OK. Yeah. Thanks for that. Because I did want to follow up and I think you may have answered that to an 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 inventories continuing to come off especially with us approaching winter. We're 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 they're looking to fix ships on the spot market may be earlier than we've been used to seeing. Anything there, we can add.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

There's definitely more interest on the time charter front. So that's for real and I think that's a reflection of where it is being in as traders or real end-users. So they would like to have ships or their needs need to have ships and this is I think is simply a reflection or their view of the market and they expect that 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 all 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 they're there -- 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 is not going to grow rapidly, but it is happening steadily and measured and eventually. So you come to the tipping point when you can we'll get some more traction on on on on rates.

Omar Nokta -- Clarkson Securities -- Analyst

Yeah, very good. We'll keep our eyes open for that tipping point. Thanks, Svein.

Operator

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

Magnus Fyhr -- H.C. Wainwright and Company -- Analyst

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. Time charter recovery 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 upfront? Or how would you structure some of the contracts make perhaps with profit sharing?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

We are simple business guys, right? So we look at the money. 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 had very rewarding rates. This summer hasn't really been very exciting.

So I think you should expect that once the rates are sort of 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 is no fixed percentage and if you have to keep in mind that time charter market for large tankers, the liquidity is rather thin, is not that much business. If you look at the fleet 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 money we will see seek to engage again.

Magnus Fyhr -- H.C. Wainwright and Company -- Analyst

All right. Thank you. And just one question on the drydock and you mentioned you have three ships going into the drydock next year. Any thoughts or what the -- can you move them up? Or what have you thinking thereof when you want to do them?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

So depend -- the plan on the schedule is one for the first half and two and 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 are going to be delivered and so forth. But that's a tentative schedule.

Magnus Fyhr -- H.C. Wainwright and Company -- Analyst

All right. I just want to ask a final question just on the cost side with the -- have you seen any change this year? You mentioned that there is some increasing time to drydock. But in general, as far as the daily opex you see that kind of normalizing here. Or are you just seeing potentially more cost for COVID-related expenses?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

I think we manage our opex side there quite well during these times, but there have been additional costs on time-related to crew changes in a particular. So and these crew change stories are still a very big challenge for the industry. I think every shipowner has got crew that is staying on board longer than we originally normally planned or had to take some time and deviations into ports recruiting crew changes is possible. And depends on nationalities.

So it's still a very very difficult task. And hats off to the guys we have at the -- are running are crewing. So there's marginal cost, but that's what 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 to the technical department essentially.

So I think that's still a very good number.

Magnus Fyhr -- H.C. Wainwright and Company -- Analyst

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

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Sure. Thank you.

Operator

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

Ben Nolan -- Stifel Financial Corp. -- Analyst

Hey. Good afternoon, guys. I really just have one question and it relates to the sort of some of the noise that's been going on in the market. Obviously, two of your competitors on 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. I'm curious where you stand in terms of saying, OK, well are there benefits to economies of scale either from our shipping perspective or capital markets perspective. And are you at all interested in that? Or more sort of that curious observer from afar.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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 is certainly big enough. We have a meaningful footprint in the market. I think on the debt financing side we are financing ourselves that equal or maybe better terms even than companies that our size or even larger.

I think in the equity markets, we are -- our stock is relative to underlying values these 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 joke a bit that the noise on conservation is mostly driven by bankers who want certain fees on these. So and not necessarily.

They're shareholders and then we have very handsome book owners in our company and none of them is sort of chasing us to make the company bigger just for the sake of being bigger. Or trying to quantify what the economics or that can be. You might have the same 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 these shipping companies.

There are other things that are more important. So, that being said, I think we've demonstrated in the past as you alluded to that. We acquired Samco Shipholding in 2014, we acquired a BW fleet in '17. So, we're always open to what can be good opportunities and will be a good transaction for the shareholders of DHT.

Ben Nolan -- Stifel Financial Corp. -- Analyst

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.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you.

Operator

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

Ronald Silvera -- R.E. Silvera and Associates Marine Surveyors and Consultants, Inc. -- Analyst

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. If you see the market, which we're anticipating we're at the bottom 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?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Well, I think our actions in the past to do prepayments or 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, but we 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 a strong balance sheet that you can have and maybe even lower than ownership than what we have today to give you more flexibility.

So I think that's to be expected to this, yes.

Ronald Silvera -- R.E. Silvera and Associates Marine Surveyors and Consultants, Inc. -- Analyst

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 of, I noticed is that you built up quite a bit of your consumable inventory. Was that because and that fuels, etc. Was that because of a lesser rate of business or because you anticipated the rise in oil prices and squirreled away some additional inventory?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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 these impacts then they add the inventory or the or the working capital in the company. So when we have much more spot exposure and then oil prices -- it will be oil price-sensitive, of course, this will vary.

But 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 they're the freight market for tankers is based on what is called world scale and the bunker cost is sort of included in that. So it's a very good correlation between that and the freight level.

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.

Ronald Silvera -- R.E. Silvera and Associates Marine Surveyors and Consultants, Inc. -- Analyst

OK. Well, you ended up doing a really 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.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Sure. Thank you very much.

Ronald Silvera -- R.E. Silvera and Associates Marine Surveyors and Consultants, Inc. -- Analyst

Congratulations on doing a really great job, especially continuing to reduce the debt.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you, sir. Wishing you a good day ahead.

Operator

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

Chris Tsung -- Webber Research -- Analyst

Good afternoon, Svein. How are you?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

I'm good thanks.

Chris Tsung -- Webber Research -- Analyst

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 faced on the spot for Q4 and what the rates were?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

We can do that for you. So for Q4, it's 59%. That is $13,700 per day.

Chris Tsung -- Webber Research -- Analyst

Thank you and can -- 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?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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 unit and we will be entitled to an amount in the range of $5.5 to $6.5 million. We expect that to be received in the first quarter next year.

So, we don't think the tax could be in the sort of 25% range. So -- but all this has to be determined. So that's why we're not more specific in their press release. So don't arrest us on the exact number, but it could be in that range.

Chris Tsung -- Webber Research -- Analyst

Yeah. I know. I understand. That's a super helpful color and I guess this is like just a one-time payout.

We shouldn't expect this again anytime soon?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

That's correct.

Chris Tsung -- Webber Research -- Analyst

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 three in Q4 and the three in 2022?

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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

Chris Tsung -- Webber Research -- Analyst

OK. Yeah, we'll do. Thank you so much. That's it for me thank you.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you. 

Operator

Thank you. [Operator instructions] We do have one more question at this time this comes from the line of Michael Moscow of MRM. Please go ahead.

Unknown speaker

Appreciate it. Can you elaborate on two things? Can 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 love to know what you thought is on that, too. Thank you.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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 trades they will be out of business and that oil will then benefit the rest of the fleet, which is sort of in 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 a smaller fleet and more oil in the market. That's why I think this is potentially a good event. On the -- on your second question, I've been in this game for 30 years, and I am not prepared to give you that number.

Unknown speaker

You're hesitant to give the number.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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

Unknown speaker

OK. I appreciate it. Thank you so much.

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Thank you.

Operator

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

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

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

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Laila Halvorsen -- Chief Financial Officer

Svein Moxnes Harfjeld -- Co-Chief Executive Officer

Randy Giveans -- Jefferies -- Analyst

Jon Chappell -- Evercore ISI -- Analyst

Omar Nokta -- Clarkson Securities -- Analyst

Magnus Fyhr -- H.C. Wainwright and Company -- Analyst

Ben Nolan -- Stifel Financial Corp. -- Analyst

Ronald Silvera -- R.E. Silvera and Associates Marine Surveyors and Consultants, Inc. -- Analyst

Chris Tsung -- Webber Research -- Analyst

Unknown speaker

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