LNG shipowner Cool Company appears to have achieved a charter rate in the low $90,000s per day range for a newbuilding fixed to Gail (India) for up to 16 years.
In a results call, chief executive Richard Tyrrell did not put a figure on the charter rate on the deal but said CoolCo had received a return on equity in the “high teens”.
Chief financial officer John Boots reiterated that the company previously stated it needed a charter rate of at least $82,000 per day on the two $26m LNG newbuildings, scheduled for delivery in November 2024, to achieve a 10% equity return, with a breakeven point of $69,000 per day.
Shipbrokers have calculated that the daily rate is likely in the low $90,000 range.
The vessel is fixed to Gail (India) for 14 years. The Indian LNG buyer has the option to extend the hire by an additional two-year period at the end of the charter.
Tyrrell said the charter ranks as the “largest single contract CoolCo has ever entered into”.
He said it had “taken some patience” and described it as an “exciting development”, adding that the two companies are aiming to work together on future projects.
The CEO said the deal sets a “supportive precedent” for the company’s second LNG newbuilding, and emphasised that “active discussions continue” around it.
Tyrrell said the charter compares “highly favourably” with the newbuilding’s purchase price.
He said that the current newbuildings, priced at approximately $260m, will require charter rates exceeding $100,000 per day, which might be optimistic. He added that even the most competitive costs of capital in the industry will demand rates well into the $90,000 per day range.
Announcing lower first-quarter figures on Wednesday, Tyrrell detailed that the rate on CoolCo’s lone variable spot-chartered vessel had fallen from $102,000 per day in the fourth quarter 2023 to $55,000 per day in the first three months of this year.
He said this, and the 51-day offhire between charters for one of its vessels along with delivery related voyage costs, weighed on the company’s time charter equivalent earnings figures.
The CEO said the outlook for the second quarter is one of stabilisation in LNG prices and shipping rates.
He said the company’s expectation for the forthcoming fixing season is that charter rates will be higher than today, shipping distances longer as more cargoes deliver to the east and that disruptions to the Panama and Suez Canals will continue, forcing vessels to take longer routes.
He added that: “.. [LNG] steam turbine vessels will bear the brunt of any falls in utilisation levels as newbuilds deliver.”
‘Signs of life’
Boots said CoolCo has an LNG carrier coming available in late July, another in early August and one in November.
Tyrrell said the longer-term 12-month LNG charter market is “starting to show signs of life”.
But added that it is important this develops positively before CoolCo’s 160,000-cbm Kool Blizzard (built 2015) and 162,000-cbm Kool Glacier (built 2014) come off charter later this year.
He detailed that an LNG cargo is currently worth around $30m, with more than 25% of this margin motivating shippers to keep length in their fleets.
The company chief said LNG is becoming competitive again, compared to oil and coal, and more cargoes are heading East, increasing tonne-miles and shipping requirements.
He said market volatility could also prove positive for the company.
“While CoolCo has been quite defensive in its chartering strategy, it does have vessels that would benefit if volatility returns,” he commented.
CoolCo is guiding on operating revenues of between $83m and 84m for the second quarter of 2024.
