LNG carrier operator CoolCo is upbeat about exercising the previously announced option for two newbuild LNG carriers which are currently under construction at South Korea’s Hyundai Samho.
Singapore’s EPS, led by Idan Ofer, and Golar LNG, led by Tor Olav Troim, completed the formation of CoolCo last year.
EPS now has about 49.9 percent percent of shares in CoolCo, Golar has 8.3 percent, while public investors hold the rest of the shares in the firm that recently applied to list on the New York Stock Exchange (NYSE).
CoolCo completed the purchase in April last year of all eight TFDE vessels from Golar as part of a deal revealed in December 2021. FSRU player Hoegh LNG will buy one of these carriers under a recent deal.
“Significant interest” from potential charterers
After the vessel purchase deal with Golar, CoolCo signed deals in November 2022 with units of its largest shareholder 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 also entered into an option agreement to acquire newbuild contracts for two 2-stroke LNG carriers scheduled to deliver in second half of 2024.
According to CoolCo, the exercise price for each carrier is $234 million and the option is exercisable until June 30, 2023.
The price is lower compared to current newbuild prices of about $250 million for 174,000-cbm LNG carriers in South Korea.
“Only four to six uncontracted newbuilds deliver ahead of these two vessels and CoolCo is receiving significant interest from potential charterers seeking long-term contracts,” the firm said in its quarterly report on Tuesday.
The company said it expects to agree “accretive contracts and secure attractive financing” prior to exercising the option.
CoolCo said in a presentation that last done 10‐year deals on newbuildings were at more than $100,000 per day.
“2023 looks fundamentally tighter than 2022”
CoolCo reported total operating revenues of $90.3 million for the fourth quarter, compared to $65.8 million for the third quarter, with net income of $33.1 million and earnings per share of $0.68.
The company’s adjusted Ebitda was $58.6 million, compared to $42.4 million in the third quarter.
CoolCo achieved average time charter equivalent earnings (TCE) of $83,600 per day in the fourth quarter, compared to $73,200 per day in the third quarter.
Looking ahead, CoolCo said that new developments are expected to strengthen an already tight underlying market in 2023.
The firm will have in total five vessels available for charter during 2023 and 2024.
“Despite seasonal market softness in the spot market for LNG carriers, the 12-month market remains strong and 2023 looks fundamentally tighter than 2022,” Richard Tyrrell, CEO of CoolCo, said.
“Freeport LNG’s export terminal in the US Gulf is now well into the process of restarting after several months offline, Europe will not have access to the same level of Russian pipeline gas as it previously relied upon, and Asia could soon outbid Europe for spot volumes, potentially pushing up ton miles,” he said.
“As one of the few listed LNG shipping companies with open tonnage this year and next, we look forward to securing additional contracts that reflect the re-priced LNG carrier charter market and realize significant value for shareholders, including for the two highly sought-after Hyundai Samho newbuildings on which we hold an option,” Tyrrell said.