Idan Ofer-controlled LNG shipowner Cool Company has encountered negative chartering sentiment as it seeks employment for two late-2024 delivering newbuildings, but is optimistic about charterers’ needs later this year.
Announcing its fourth-quarter results, CoolCo said it is continuing discussions with “multiple potential charterers” on the LNG duo — the 174,000-cbm newbuildings Kool Tiger and Kool Panther — which deliver towards the end of the second half of 2024.
CoolCo said: “While headline LNG carrier rates and recent negative sentiment in the sector have served as a headwind to securing long-term employment at attractive rates, several charterers are known to have specific and as-yet-unmet transportation requirements and are expected to come to market in advance of the 2024 winter season and delivery of the newbuilds.”
Commenting on the market conditions, CoolCo chief executive Richard Tyrrell said that due to the relatively warm northern hemisphere winter, gas prices have fallen.
He said this reduced the option value to charterers of maintaining excess LNG carrier capacity to facilitate opportunistic trades.
“This, combined with some delays to certain liquefaction projects, has resulted in [LNG carrier] sublets weighing on time charter rates,” he said.
But Tyrrell assured that CoolCo’s newbuildings “continue to attract interest and remain the only such vessels in the market available from independent owners in 2024, and thus the only such vessels likely to be available for term contracts”.
CoolCo’s net income for 2023 more than doubled to $176.4m up from $87.5m a year earlier.
Total operating revenue also climbed steeply to $379m up from $213.0m in 2022.
But in the fourth quarter, CoolCo’s net income slipped to $22.4m down on the $33.1m logged in the corresponding period of 2022.
The company said the fall was primarily related to unrealised mark-to-market losses on our interest rate swaps.
However, quarterly total operating revenue rose to $97.1m, up from $90.3m in the same three months of the previous year.
During the quarter, CoolCo entered into sale-and-leaseback financing arrangements with Huaxia Financial Leasing for its two on-order LNG newbuildings.
CoolCo also received commitments from certain banks to upsize an existing $520m term loan facility maturing in May 2029 in anticipation of the maturity of the two sale-and-leaseback facilities during the first quarter of 2025.
Tyrrell said: “In the fourth quarter, we benefited from strong operational performance, a seasonal uplift on our variable rate contract and the continuing impact of our fleet’s fixed-rate charter coverage.”
He continued: “Additionally, we took measured exposure to the charter market in the form of one vessel that we chose to deploy directly in the spot market while waiting for the right term opportunity.
Record breaker
He said the net result was a sequentially higher time-charter equivalent rate at $87,300 per day, which ranked as CoolCo’s “highest-ever quarterly TCE”. This compares with $82,400 per day in the third quarter of 2023.
Tyrrell noted that LNG charter rates returned to “more normalised levels” following what he described as “an extraordinary period” following the Russian invasion of Ukraine.
Despite this, he said CoolCo benefited from having several medium and long-term charters at previously contracted higher levels
He highlighted that the company secured a 12-month charter for its spot market vessel, to begin during the first quarter of this year.
“Our next available vessels are well spaced and do not come open before the second half of 2024, when the market is anticipated to be in a seasonal upswing powered by expected longer voyage distances as greater volumes of LNG head east this year,” Tyrrell said.
“CoolCo has a backlog of $1.4 billion of contracted revenue at the end of the quarter and continues to expect near-term earnings growth from its fully financed newbuilds, when delivered, to offset current market weakness, should it persist.”
