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Spot LNG shipping rates are now at record-low levels for this time of the year, mainly due to a high number of vessel deliveries.
Tyrrell said during CoolCo’s third-quarter earnings call on Thursday that the current market conditions could provide growth opportunities for the company.
“We’ve gone through the past few years of very robust markets. And we’ve always had an ambition to grow. And maybe it’s not been so easy to find things that made sense over the past couple of years,” he said.
“But now we’re going to go into an environment where we do think things will start to make sense. Of course, we’ve got to be a little bit careful what we wish for, because if asset prices come down, it might make growth opportunities more attractive. But of course, we have to think about the impact on our own fleet by the same token,” Tyrrell said.
“But our view is that we are strategically very, very well placed to consolidate the market. And we’ve now put what we need in place to ensure that we can do that when these opportunities come along. The kind of opportunities we’re looking at might be assets, or it might be corporates in nature,” he said.
“And of course, if our share price continues to trade well below NAV, maybe you can throw that in as an opportunity as well, and hence the buyback program,” Tyrrell said.
Long-term market looking “exceptionally strong”
Answering a question on what makes him confident that now is a good time to invest, Tyrrell said the long-term market is looking “exceptionally strong.”
“The short term, we view it as being more of a period of indigestion as these vessels
come in advance of the project, for which they were originally chartered on the one
hand, and come in advance of when they actually switch out the older vessels in the
fleet,” he said.
“One of them is a function of when projects arrive, and the other one is a function of
just how long it takes for older vessels to get scheduled out of the fleet. So both those
things we see as coming,” Tyrrell said.
“However, for those who don’t have a strong balance sheet, maybe they’ll be keen to sell,
given those dynamics,” he said.
Ship sale
Tyrrell also discussed whether CoolCo would be interested in selling an LNG carrier in the current market, such as the newbuild without a firm contract.
“It’s a little bit we want to buy low, sell high. And of course, we do look at options for selling ships,” he said.
He noted that CoolCo has sold ships in the past, and “those types of things are not off the table.”
“What kind of ships of ours have the highest value potential for buyers? Well, if you’re excluding those which maybe are owners you couldn’t sell to, then you’ve got to say the ships that have the potential for converting into an FSRU have a premium value, and we have a few of those,” he said.
“Would we sell a newbuild? At a certain price, of course,” he said.
“However, our newbuild program is part of our fleet renewal program, and if we sell the newbuild, we’d be looking to buy a couple more down the line with the proceeds,” Tyrrell said.
Seeking charters
The company has seven TFDE LNG carriers it acquired from Golar LNG and the four LNG carriers it purchased from its largest shareholder Eastern Pacific Shipping.
Besides these vessels, CoolCo purchased two newbuild LNG carriers from EPS, and they feature GTT’s Mark III Flex membrane cargo tank system, reliquification, air-lubrication, and shaft generators.
The shipping firm exercised its option with affiliates of EPS Ventures in June 2023 to acquire newbuild contracts for the two 2-stroke LNG carriers scheduled to deliver in the fourth quarter of 2024.
In May, CoolCo entered into a 14-year charter deal with India’s largest gas utility GAIL for one of the newbuild LNG carriers currently under construction in South Korea.
CoolCo will deliver Gail Segar (Kool Panther) to state-owned GAIL in the Gulf of Mexico next year.
The company took delivery of the first vessel, Kool Tiger, during the third quarter.
CoolCo is seeking long-term employment for Kool Tiger and its 2014-built TFDE vessel, Kool Glacier.
Both vessels are currently subject to weaker rates in the short-term market.