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Cool Company Ltd. Q1 2023 Business Update

23 Μαΐου 2023.

richardtyrrell2This release includes business updates and unaudited financial results for the three months ended March 31, 2023 ("Q1", "Q1 2023" or the "Quarter") of Cool Company Ltd. ("CoolCo" or the "Company").

 

Q1 Highlights and Subsequent Events

 

•Generated total operating revenues of $98.6 million in Q1, compared to $90.3 million for the fourth quarter 2022 ("Q4" or "Q4 2022")

•Net income of $70.1 million in Q1, compared to $33.1 million for Q4 and earnings per share of $1.28 for Q1;

•Achieved average Time Charter Equivalent Earnings ("TCE")1 of $83,700 per day for Q1, compared to $83,600, per day for Q4;

•Adjusted EBITDA1 of $67.8 million for Q1, compared to $58.6 million for Q4;

•Commenced previously announced three-year charter on February 11, 2023 at a rate that is front-end loaded and averages $120,000 per day over the charter period (average rate applies to quarterly revenues and TCE);

•Concluded the sale of Golar Sealon March 22, 2023 for $184.3 million, releasing approximately $94.4 million, after repayment of its associated debt, that is available to fund the acquisition of the two Hyundai Samho LNG carriers (the "Newbuild Vessels") should the Company decide to exercise the newbuild option expiring at the end of June 2023;

•On March 17, 2023, CoolCo's shares commenced trading on the New York Stock Exchange (“NYSE”) under the ticker “CLCO”;

•On May 17, 2023, the Company announced a new multi-year time charter agreement for a TFDE vessel starting early 2024 with an energy major; and

•Declared a dividend for Q1 of $0.41 per share, to be paid on or around June 9, 2023 to all shareholders of record on June 1, 2023.

Richard Tyrrell, CEO, commented: “Over the quarters ahead, CoolCo has a clear path to further earnings and dividend growth, punctuated by a series of identifiable milestones: fixing the vessel that becomes available in September 2023, as well as the two vessels available in 2024 that are currently trading at rates well below market levels, and if we exercise the option to acquire two newbuild vessels adding further earnings backlog by securing charters for those vessels and funding the acquisition of those newbuilds with an optimal mix of debt and cash on hand.

The term market for modern LNG carriers has demonstrated both strength and stability, reflecting the long-term nature of the LNG business and the sector’s supportive fundamentals. For the few owners with available tonnage, including CoolCo, charterers have remained eager to secure multi-year charters at attractive rates for owners. This stands in sharp contrast to the seasonal lows and high volatility of the spot market, which is currently made up almost entirely of sublets, rather than owners with available tonnage. CoolCo is in an excellent position to successfully execute our term chartering strategy, realize the latent earnings and dividend growth potential in our newbuild purchase option and vessels on below-market charters, and benefiting from the expanded investor base made possible by our recent NYSE listing.

Additionally, I would like to highlight the publication of our ESG report for 2022. Last year, the annual efficiency ratio that measures emissions, dropped by 4.5% bringing the total fall since 2019 to 18%, which compares to the IMO target of 6.5%. Our new performance plan includes LNGe upgrades to our TFDE vessels that are expected to reduce our annual efficiency ratio to 6.4 by 2030, a 35% reduction from 2019 levels”.

 

LNG Market Review

 

The Quarter commenced with the Japan/Korea Marker gas price ("JKM") at $29/MMBtu, the Dutch Title Transfer Facility gas price ("TTF") at $27/MMBtu and quoted TFDE headline spot rates of $163,000 per day. Unwinding of floating storage, a warmer than normal winter, falling LNG prices and no arbitrage to pull cargoes east saw available vessels increase throughout January to early February and spot rates began their seasonal decline. Sentiment and momentum turned positive in mid-February following confirmation of Freeport LNG’s restart, although this was short-lived as a long list of available sublet tonnage in the Atlantic maintained pressure on rates. Term-rates, however, have remained strong with charterers needing to charter vessels for 12 months or longer to secure winter coverage. The Quarter concluded with JKM at $13/MMBtu, TTF at $15/MMBtu and quoted TFDE headline spot rates of $54,000 per day.

Masked by a spot market dominated by sublets, there are fewer owner-controlled vessels available to charter for the forthcoming winter than there were this time last year. Those few owners with available tonnage, including CoolCo, remain reluctant to fix their vessels for short periods that only cover the highly profitable winter market, preferring longer term work instead. Floating storage is once again higher than normal and interest in longer-term charters that cover the upcoming winter season is increasing. We expect that, already strong term rates will likely firm further over the coming months when CoolCo expects to fix its September 2023 vessel opening.

 

Operational Review

 

CoolCo's fleet continued to perform well with no technical off-hire during the Quarter. The Golar Seal completed its charter and was immediately delivered to her new owner on March 22, 2023, ensuring no idle-time and a Q1 fleet utilization of 100%. There are no drydocks planned for 2023, with the next drydock expected during the second quarter of 2024.

 

Business Development

 

CoolCo is in discussions with multiple potential charterers seeking work for the 2-stroke LNG carrier newbuilds with anticipated delivery in late 2024 which the Company has an option to acquire. With the recent sale of the Golar Seal, the Company has sufficient funds available to fund the initial milestones of the newbuild option (if exercised) on or prior to June 30, 2023. The total price of $234 million for each carrier is approximately 10% lower than currently quoted prices for comparable newbuild vessels that will not deliver until 2027/2028.

 

Financing and Liquidity

 

Inclusive of $94.4 million of cash released upon sale of Golar Seal, CoolCo had cash and cash equivalents of $240.6 million at March 31, 2023. Total short and long-term debt, net of deferred finance charges and after repayment of $88.0 million of debt associated with the Golar Seal, as of March 31, 2023 amounted to $1,032.4 million. Total Contractual Debt1 stood at $1,145.3 million, which comprised of $442.5 million in respect of the five vessel bank financing facility maturing in March 2027 (the "$570 million bank facility"), $500.6 million in respect of the four vessel bank financing facility maturing in May 2029 (the “$520 million term loan facility”), and $202.2 million in respect of the two sale and leaseback facilities maturing in January 2025 (Ice and Kelvin).

During Q1, we entered into further floating interest rate (SOFR) swap agreements for a notional amount of $132.2 million in respect of the ING bank facility. Subsequent to Quarter end, we entered into further SOFR swap agreements for a notional amount of $40.0 million in respect of the same facility. Overall, the Company’s interest rate on its debt is fixed or hedged for approximately 89%, adjusting for existing cash on hand, but excluding cash that is required to exercise the newbuild option.

Full report: Cool Company Ltd

 

 

 

 

 

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