LNG carrier operator CoolCo is still in talks with charterers to find work for two newbuild LNG carriers it purchased from its largest shareholder Eastern Pacific Shipping.
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.
The LNG shipping firm said in its quarterly results report that the initial option exercise price was $56.9 million per vessel, resulting in a total of $113.8 million paid to EPS on July 3.
CoolCo expects to fund the newbuilds, named Kool Tiger and Kool Panther, with a combination of cash on hand, including from the sale of the 2013-built LNG carrier, Golar Seal, and committed debt financing.
The firm said it is in discussions with “multiple potential charterers” seeking work for the newbuilds, but it did not provide any further information.
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 nine LNG carriers and eight FSRUs in addition to owned fleet, according to its website.
CoolCo achieved average time charter equivalent earnings (TCE) of $81,100 per day for the second quarter, compared to $83,700 per day in the prior quarter.
The firm attributed the decrease mainly to a lower variable rate charter, linked to the spot market.
Moreover, the LNG shipping firm generated total operating revenues of $90.3 million in the second quarter, compared to $98.6 million for the first quarter of 2023 (“Q1” or “Q1 2023”),
CoolCo said the reduction is mainly related to the sale of Golar Seal in late March.
The company reported a net income of $44.6 million in the second quarter, compared to $70.1 million in the prior quarter, and adjusted Ebitda of $59.9 million, compared to $67.8 million in the prior quarter.
CEO Richard Tyrrell said that the company achieved full utilization across the CoolCo fleet and secured “well-timed growth” through the exercise of its option of the two vessels with pricing “materially below current levels”.
“By exercising our option to acquire these vessels with scheduled delivery years well in advance of comparable newbuild orders, we are one of the few independent owners with availability in an early period of rapid expected growth in LNG supply,” he said.
“In conjunction with our three existing vessels that come into the charter market in 2023 and 2024, of which two are currently at rates well below prevailing levels, we have a clear path towards the realization of significant incremental value, cashflow, and continued dividend-paying capacity,” Tyrrell said.
Market seems “tightly coiled”
Tyrrell also discussed the LNG shipping market and volatility in gas pricing.
“With the approach of winter in the Northern Hemisphere, which is typically accompanied by a surge in LNG carrier demand related to both increased gas consumption and additional utilization for floating storage, trading arbitrage involving lengthy voyages to the Far East, and weather-related delays that soak up shipping capacity, the market seems tightly coiled,” he said.
Moreover, the recent “extreme volatility” in gas pricing demonstrates a continued emphasis on energy security, as importers continue to put a premium on the commodity and the shipping capacity required to ensure security of supply, Tyrrell said.
“It remains to be seen how the coming winter will ultimately play out, but similar tightness of both cargoes and shipping capacity has historically presaged dramatic inflections in the spot charter market and provided firm support for both rates and charter durations in the more stable time charter market,” he said.
“As owners of modern LNG carriers that will be available for time charter employment through the medium term, we believe that our strategy of combining the certainty of long-term charter coverage with a measured amount of charter market exposure has the potential to shine in the quarters ahead,” Tyrrell added.