Eastern Pacific Shipping-led Cool Company (CoolCo) is seeing a raft of factors including the floating storage of LNG cargoes lining up to push charter rates higher this winter.
Speaking on a results webcast, chief executive Richard Tyrrell described the company as “quite excited” about the market outlook.
He highlighted that European gas storage is quite full and added: “we are starting to see charterers use LNG carriers for floating storage once again.”
Tyrrell said the winter heating season is “around the corner and the contango trade is in focus”.
He said gas markets remain volatile due to the threat of strike action at liquefaction plants in Australia, the potential for Panama Canal disruption, the loss of any remaining Russian pipeline gas to Europe and uncertainties over winter weather.
Tyrrell said LNG carrier spot charter rates are responding, highlighting that the company has its 160,000-cbm tri-fuel diesel-electric (TFDE) LNG carrier Kool Husky (built 2014, ex-Golar Bear) coming open into this “strong market”.
He claimed that the LNG carrier is one of the last two independently owned, TFDE LNG carriers available in the market.
The CEO said the company is “seeing more upside than downside in the rates” with spot rates starting to climb into the $120,000 per day range and “rising fast” and term levels at around $100,000 per day and expected to follow the upward trajectory.
Answering analysts questions, Tyrrell said the company has the option to trade Kool Husky spot or fix it on term business.
On the company’s two incoming LNG carrier newbuildings, which are scheduled for delivery in late 2024, he said CoolCo is “waiting to reach a landing zone” on charter rates for them.
He said CoolCo is holding out for rates which reflect the current price of LNG newbuildings which, he acknowledged, is “quite significantly higher” than what the company paid for those vessels.
Tyrrell said CoolCo expects to have updates on vessel charters by its next earnings call if not before.
During the call, Tyrrell revealed that a charterer of one of CoolCo’s TFDE LNG carriers had exercised an option on the ship during the quarter which extended its contract coverage out to 2028. He did not name the vessel.
Asked about the company's vessel retrofit job, which will see five of its LNG carriers fitted with sub-coolers for LNG boil-off reliquefaction units, he said the upgrades could result in average savings of around $10,000 per day for the ships and CoolCo will try to secure this back from charterers.
Looking ahead he said the company expects to see its vessels fixed at higher rates as they roll off their legacy charters.
Tyrrell said the company is seeing: “All the ingredients for an interesting near-term shipping market. But he is also bullish on the long-term market pointing to the final investment decisions taken and incoming on liquefaction projects, the build-out of regasification infrastructure and the environmental benefits of gas over coal.
