LNG carrier operator CoolCo is still in talks with charterers to find work for two newbuild LNG vessels it purchased from its largest shareholder Eastern Pacific Shipping.
“CoolCo continues to be in discussions with multiple potential charterers seeking employment for the newbuilds,” the firm said in its third-quarter report on Tuesday.
CoolCo exercised its option with affiliates of EPS Ventures in June to acquire newbuild contracts for two 2-stroke LNG carriers scheduled to deliver in second half of 2024.
South Korea’s Hyundai Samho is building these 174,000-cbm ME-GA vessels and they feature GTT’s Mark III Flex membrane cargo tank system, reliquification, air-lubrication, and shaft generators.
CoolCo will pay $234 million for each of the LNG carriers.
In October, CoolCO entered into sale and leaseback financing arrangements with China’s Huaxia Financial Leasing, the leasing arm of Hua Xia Bank, for the Kool Tiger and Kool Panther vessels.
Besides these two newbuilds, CoolCo has seven TFDE LNG carriers it acquired from Golar LNG and the four LNG carriers it purchased from EPS.
The company also manages eight LNG carriers and ten FSRUs in addition to owned fleet, according to its website.
CoolCo achieved average time charter equivalent earnings (TCE) of $82,400 per day for the third quarter, compared to $81,100 per day in the prior quarter.
The company’s fleet “continued to perform well” with a Q3 fleet utilization of 97.3 percent with the remaining covered by a ballast bonus, compared to 100 percent for the first half of the 2023.
CoolCo said there are no drydocks planned for 2023, with the next drydock expected during the second quarter of 2024.
“Subsequent to the quarter, a ship management services customer has decided to transfer up to nine vessels for which CoolCo currently provides technical management to managers that solely provide ship management services over the course of 2024,” it said.
Moreover, the LNG shipping firm generated total operating revenues of $92.9 million in the third quarter, compared to $90.3 million for the second quarter of 2023.
The company reported a net income of $39.2 million in the third quarter, compared to $44.6 million in the prior quarter, and adjusted Ebitda of $62.8 million, compared to $59.9 million in the prior quarter.
CoolCo said the decrease in net income was primarily due to lower unrealized mark-to-market gains on its interest rate swaps.
The company declared a dividend for the third quarter of $0.41 per share, to be paid to shareholders of record on December 7.
One vessel in spot market
CEO Richard Tyrrell said that during the third quarter the company “benefited from strong operational performance, a seasonal uplift on our variable rate contract and the fleet’s fixed-rate, medium- and long-term charter coverage.”
“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,” he said.
According to Tyrrrell, the net result was a “sequentially higher TCE level” at $82,400 per day.
“While not currently reaching the levels seen in the months following the Russian invasion of Ukraine, rates in the early fourth quarter have settled in at levels above historic norms for both the industry and for the CoolCo fleet. This provides us upside on legacy contracts as they renew and scope to maintain TCE performance,” he said.
“During the second half of 2023, newbuild deliveries have been limited and overall fleet supply has remained well-balanced against demand,” Tyrrell said.
The last two newbuilds in the market from independent owners that deliver ahead of CoolCo’s 2024 deliveries have now secured long-term employment, positioning the company’s newbuilds “as both the next in line and some of the only uncommitted newbuilds currently available before 2026,” he said.
“Newbuild pricing has remained elevated relative to historical levels at about $260 million per vessel, which along with the current interest rate environment is “providing significant support to the long-term charter rates available for newbuilds while also discouraging incremental newbuild orders,” he said.
“Moving forward, a continued strength in gas prices and tightening regulations are expected to put increasing pressure on the large number of remaining steam turbine vessels in the
market, likely resulting in heavy scrapping in the coming years,” Tyrrell said.
Limited chartering activity ahead of 2023/24 winter
As the weather begins to turn colder in the Northern Hemisphere, seasonal support for LNG carrier demand “typically ratchets up,” Tyrrell said.
“We have thus far seen only limited term chartering activity ahead of the 2023/24 winter market, but with the continued absence of Europe’s traditional supply backstop from Russian pipeline gas and few vessels currently employed as floating storage, the potential for weather events to produce volatility, and thus demand for LNG carriers, is heightened,” he said.
“Ultimately, energy security remains a top priority for many LNG importing nations, and we expect European demand to remain strong and Asian demand to continue its recovery,” Tyrrell said.