LNG carrier operator CoolCo continues to hold 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 two newbuilds it has on order for delivery towards the end of second half of 2024,” the NYSE-listed firm said in its fourth-quarter report on Wednesday.
The LNG shipping firm provided a similar update in its previous quarterly report.
“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,” CoolCo said in the new report.
CoolCo exercised its option with affiliates of EPS Ventures in June 2023 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.
Technical management of two vessels transferred
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 eight FSRUs in addition to owned fleet, according to its website.
Subsequent to the fourth quarter, “a ship management services customer has decided to transfer an additional two vessels for which CoolCo currently provides technical management to managers that solely provide ship management services,” the company said in the report.
“This is not expected to materially impact CoolCo’s earnings and we expect to incur some immaterial restructuring costs to adjust our operations in light of this change,” the firm said.
CoolCo said it fleet continued to “perform well” with a Q4 fleet utilization of 97 percent with the remaining 3 percent covered by a ballast bonus.
“While there were no drydocks in 2023, four drydocks are expected during 2024, starting with one in the second quarter and the remaining three during the third quarter,” the firm said.
Highest quarterly TCE
CoolCo generated total operating revenues of $97.1 million in the fourth quarter, compared to $92.9 million for the third quarter of 2023.
Net income of $22.41 million decreased compared to $39.21 million in the prior quarter, primarily due to unrealized mark-to-market losses on the company’s interest rate swaps.
The LNG shipping firm achieved average time Charter equivalent earnings (TCE) of $87,300 per day for the fourth quarter, compared to $82,400 per day in the prior quarter.
CEO Richard Tyrrell said that in the fourth quarter, the company 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.”
“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. The net result was a sequentially higher TCE level at $87,300 per day, CoolCo’s highest ever quarterly TCE,” he said.
Tyrrell said that CoolCo’s 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.”
“Due to the relatively warm northern hemisphere winter, gas prices have fallen and 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 sublets weighing on time charter rates,” he said.
“Nonetheless, CoolCo’s newbuilds 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,” Tyrrell said.