LNG carrier operator CoolCo is still in talks with potential charterers to secure work for two newbuild LNG carriers it plans to buy from its largest shareholder Eastern Pacific Shipping.
CoolCo signed deals in November 2022 with units of Idan Ofer’s EPS to add up to six LNG carriers to its fleet, and it already wrapped up the purchase of four LNG carriers under this deal.
The firm has entered into an option agreement 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 vessels.
According to CoolCo, the exercise price for each carrier is $234 million and the option is exercisable until June 30, 2023.
CoolCo said in February it was working to agree contracts and secure financing prior to exercising the option.
“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,” the firm said in its first-quarter results report on Tuesday.
With the recent sale of the 2013-built LNG carrier Golar Seal to Hoegh LNG for about $184.3 million, CoolCo has sufficient funds available to fund the initial milestones of the newbuild options on or prior to June 30, it said.
The total price of $234 million for each carrier is about 10 percent lower than currently quoted prices for comparable newbuild vessels that will not deliver until 2027/2028, CoolCo said.
Net income reaches $70.1 million
CoolCo’s shares recently started trading on the New York Stock Exchange in March and they now trade on both the NYSE and Euronext Growth Oslo under the ticker code “CLCO”.
In February, EPS bought all of the shares from Golar LNG and now owns 58.2 percent in CoolCo, while public investors hold the rest.
The firm generated total operating revenues of $98.6 million in the first quarter, compared to $90.3 million for the prior quarter, and net income of $70.1 million, compared to $33.1 million for the prior quarter.
The firm achieved average time charter equivalent earnings of $83,700 per day for the first quarter, compared to $83,600 per day for the prior quarter.
Also, adjusted Ebitda of $67.8 million rose when compared to $58.6 million in the prior quarter.
CoolCo declared a dividend for the first quarter of $0.41 per share, to be paid on or around June 9, 2023.
CoolCo has a “clear path” to further earnings and dividend growth
CEO Richard Tyrrell said that over the quarters ahead, CoolCo has a “clear path to further earnings and dividend growth, punctuated by a series of identifiable milestones.”
These include “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,” he said.
Moreover, Tyrrell said that 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,” he said.
According to Tyrrell, 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,” he said.