This release includes business updates and
unaudited financial results for the three months ended March 31,
2023 ("Q1", "Q1 2023" or the "Quarter") of Cool Company Ltd.
("CoolCo" or the "Company").
Q1 Highlights and Subsequent
Events
- Generated total operating revenues of $98.6 million in Q1,
compared to $90.3 million for the fourth quarter 2022 ("Q4" or "Q4
2022")
- Net income of $70.1 million in Q1, compared to $33.1
million for Q4 and earnings per share of $1.28 for Q1;
- Achieved average Time Charter Equivalent Earnings ("TCE")1 of
$83,700 per day for Q1, compared to $83,600, per day for Q4;
- Adjusted EBITDA1 of $67.8 million for Q1, compared to $58.6
million for Q4;
- Commenced previously announced three-year charter on February
11, 2023 at a rate that is front-end loaded and averages $120,000
per day over the charter period (average rate applies to quarterly
revenues and TCE);
- Concluded the sale of Golar Seal on March 22, 2023 for $184.3
million, releasing approximately $94.4 million, after repayment of
its associated debt, that is available to fund the acquisition of
the two Hyundai Samho LNG carriers (the "Newbuild Vessels") should
the Company decide to exercise the newbuild option expiring at the
end of June 2023;
- On March 17, 2023, CoolCo's shares commenced trading on the New
York Stock Exchange (“NYSE”) under the ticker “CLCO”;
- On May 17, 2023, the Company announced a new multi-year time
charter agreement for a TFDE vessel starting early 2024 with an
energy major; and
- Declared a dividend for Q1 of $0.41 per share, to be paid on or
around June 9, 2023 to all shareholders of record on June 1,
2023.
Richard Tyrrell, CEO,
commented:
“Over the quarters ahead, CoolCo has a clear
path to further earnings and dividend growth, punctuated by a
series of identifiable milestones: 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.
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. 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.
Additionally, I would like to highlight the
publication of our ESG report for 2022. Last year, the annual
efficiency ratio that measures emissions, dropped by 4.5% bringing
the total fall since 2019 to 18%, which compares to the IMO target
of 6.5%. Our new performance plan includes LNGe upgrades to our
TFDE vessels that are expected to reduce our annual efficiency
ratio to 6.4 by 2030, a 35% reduction from 2019 levels”.
Financial Highlights
The table below sets forth certain key financial
information for Q1 2023, Q4 2022 and Q1 2022, split between
Successor and Predecessor periods (as defined below).
|
Q1 2023 |
Q4 2022 |
Three months ended March 31,2022 |
(in thousands of $, except TCE) |
Successor |
Successor |
Successor |
Predecessor |
Total |
Time and
voyage charter revenues |
91,168 |
79,032 |
4,285 |
36,542 |
40,827 |
Total
operating revenues |
98,649 |
90,255 |
4,285 |
39,776 |
44,061 |
Operating
income |
52,022 |
48,881 |
966 |
21,661 |
22,627 |
Net
income |
70,132 |
33,069 |
(966) |
16,024 |
15,058 |
Adjusted
EBITDA1 |
67,814 |
58,621 |
1,958 |
27,400 |
29,358 |
Average daily TCE1 (to the closest $100) |
83,700 |
83,600 |
50,100 |
57,200 |
56,300 |
Note: The commencement of
operations and funding of CoolCo and the acquisition of its initial
tri-fuel diesel electric ("TFDE") LNG carriers, The Cool Pool
Limited and the shipping and FSRU management organization from
Golar LNG Limited ("Golar") were completed in a phased process. It
commenced with the funding of CoolCo on January 27, 2022 and
concluded with the acquisition of the LNG carrier and FSRU
management organization on June 30, 2022, with vessel acquisitions
taking place on different dates over that period. Results for the
three months that commenced January 1, 2022 and ended March 31,
2022 have therefore been split between the period prior to the
funding of CoolCo and various phased acquisitions of vessel and
management entities (the "Predecessor" period) and the period
subsequent to the various phased acquisitions (the "Successor"
period). The combined results are not in accordance with U.S. GAAP
and consist of the aggregate of selected financial data of the
Successor and Predecessor periods. No other adjustments have been
made to the combined presentation.
LNG Market Review
The Quarter commenced with the Japan/Korea
Marker gas price ("JKM") at $29/MMBtu, the Dutch Title Transfer
Facility gas price ("TTF") at $27/MMBtu and quoted TFDE headline
spot rates of $163,000 per day. Unwinding of floating storage, a
warmer than normal winter, falling LNG prices and no arbitrage to
pull cargoes east saw available vessels increase throughout January
to early February and spot rates began their seasonal
decline. Sentiment and momentum turned positive in
mid-February following confirmation of Freeport LNG’s restart,
although this was short-lived as a long list of available sublet
tonnage in the Atlantic maintained pressure on rates. Term-rates,
however, have remained strong with charterers needing to charter
vessels for 12 months or longer to secure winter coverage. The
Quarter concluded with JKM at $13/MMBtu, TTF at $15/MMBtu and
quoted TFDE headline spot rates of $54,000 per day.
Masked by a spot market dominated by sublets,
there are fewer owner-controlled vessels available to charter for
the forthcoming winter than there were this time last year. Those
few owners with available tonnage, including CoolCo, remain
reluctant to fix their vessels for short periods that only cover
the highly profitable winter market, preferring longer term work
instead. Floating storage is once again higher than normal and
interest in longer-term charters that cover the upcoming winter
season is increasing. We expect that, already strong term rates
will likely firm further over the coming months when CoolCo expects
to fix its September 2023 vessel opening.
Operational Review
CoolCo's fleet continued to perform well with no
technical off-hire during the Quarter. The Golar Seal completed its
charter and was immediately delivered to her new owner on March 22,
2023, ensuring no idle-time and a Q1 fleet utilization of 100%.
There are no drydocks planned for 2023, with the next drydock
expected during the second quarter of 2024.
Business Development
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. With the recent sale of the Golar Seal, the Company has
sufficient funds available to fund the initial milestones of the
newbuild option (if exercised) on or prior to June 30, 2023. The
total price of $234 million for each carrier is approximately 10%
lower than currently quoted prices for comparable newbuild vessels
that will not deliver until 2027/2028.
Financing and Liquidity
Inclusive of $94.4 million of cash released upon
sale of Golar Seal, CoolCo had cash and cash equivalents of $240.6
million at March 31, 2023. Total short and long-term debt, net of
deferred finance charges and after repayment of $88.0 million of
debt associated with the Golar Seal, as of March 31, 2023 amounted
to $1,032.4 million. Total Contractual Debt1 stood at $1,145.3
million, which comprised of $442.5 million in respect of the five
vessel bank financing facility maturing in March 2027 (the "$570
million bank facility"), $500.6 million in respect of the four
vessel bank financing facility maturing in May 2029 (the “$520
million term loan facility”), and $202.2 million in respect of the
two sale and leaseback facilities maturing in January 2025 (Ice and
Kelvin).
During Q1, we entered into further floating
interest rate (SOFR) swap agreements for a notional amount of
$132.2 million in respect of the ING bank facility. Subsequent to
Quarter end, we entered into further SOFR swap agreements for a
notional amount of $40.0 million in respect of the same facility.
Overall, the Company’s interest rate on its debt is fixed or hedged
for approximately 89%, adjusting for existing cash on hand, but
excluding cash that is required to exercise the newbuild
option.
Corporate and Other Matters
As of March 31, 2023, CoolCo had 53,688,462
shares issued and outstanding. Of these, 31,254,390 shares (58.2%)
were owned by EPS Ventures Ltd ("EPS") and 22,434,072 (41.8%) were
publicly owned.
On March 14, 2023, in relation to the proposed
listing of the Company’s ordinary shares on the NYSE, the U.S.
Securities and Exchange Commission declared the Company’s
registration statement on Form 20-F effective. After a
scheduled two-day trading suspension on the Euronext Growth Oslo,
shares in CoolCo commenced trading on both exchanges on March 17,
2023 under the ticker “CLCO”. No CoolCo securities were issued in
connection with the NYSE share listing.
In line with the Company’s variable dividend
policy, the Board has declared a Q1 dividend of $0.41 per ordinary
share. The record date is June 1, 2023 and the dividend will be
distributed to DTC-registered shareholders on or around June 9,
2023, while, due to the implementation of CSDR in Norway, the
dividend will be distributed to Euronext VPS-registered
shareholders on or about June 14, 2023.
Outlook
With a significant volume of US cargoes
currently being diverted to Europe and thereby reducing aggregate
fleet tonne-miles, it is important to place the current 50%
orderbook-to-fleet ratio into both an appropriate larger context
and the relevant competitive context for CoolCo. Set against a
backdrop of lower tonne-miles as a result of more US cargoes being
diverted to Europe, an orderbook representing 50% of the
on-the-water fleet looks high. CoolCo remains of the view that
underlying market fundamentals are supportive of the orders. Ninety
percent of vessels on order are committed to specific projects, and
an increased charterer emphasis on energy security rather than
utilization maximization, longer discharge times at European FSRUs
and seasonal storage plays mean that rising tonne-time should
mitigate the impact of lower tonne-miles for cargoes diverted to
Europe. Additionally, IMO carbon intensity indicator rules that
came into effect on January 1 2023, shipping being subject to
European carbon pricing from 2024, charterer commitments to reduce
their carbon footprints and high LNG prices are all factors that
increase the appeal and competitive advantage of modern and
efficient vessels such as those in CoolCo fleet. Much of this
demand will be at the expense of older, less efficient steam
turbine vessels that represent approximately 22% of the combined
current and ordered fleet capacity. Lastly, the limited number of
modern vessels that do become available over the next 18 months are
in the hands of even fewer owners than was previously the case,
adding to their bargaining power. As evidenced by a healthy market
for 3+ year charters, owners appear reluctant to fix vessels for
short durations covering only the most profitable winter months
when a willingness to pay for floating storage peaks, preferring
instead to secure coverage until the next wave of LNG volumes come
into the market in 2026-2027. With a 4-year lead-time, a vessel
ordered today is unlikely to frustrate this position, and at $260
million per newbuild vessel for delivery 2026/27, it will set an
increased benchmark charter rate against which the fleet becomes
priced. Collectively, these fundamentals are expected to support
the continuity of a healthy charter rate environment independent of
a seasonally volatile spot market dominated by sublets.
FORWARD LOOKING STATEMENTS
This press release and any other written or oral
statements made by us in connection with this press release include
forward-looking statements. All statements, other than statements
of historical facts, that address activities and events that will,
should, could or may occur in the future are forward-looking
statements. These forward-looking statements are made under the
"safe harbor" provisions of the U.S. Private Securities Litigation
Reform Act of 1995. You can identify these forward-looking
statements by words or phrases such as “believe,”
“anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,”
“potential,” “will,” “may,” “should,” “expect,” “could,” “would,”
“predict,” “propose,” “continue,” or the negative of these terms
and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements
include statements relating to our ability and expectations to
charter available vessels and chartering strategy, outlook,
expected results and performance , earnings and dividend growth
potential and path, statements with respect to the option to
acquire two newbuilds, dividends, expected industry and business
trends including expected trends in LNG demand, LNG orderbook, LNG
vessel supply and demand including trends of the spot market and
the term market, and factors impacting supply and demand of
vessels, backlog, charter and spot rates, contracting,
utilization, LNG vessel newbuild order-book, statements under “LNG
Market Review” and “Outlook” and other non-historical matters.
The forward-looking statements in this document
are based upon management’s current expectations, estimates and
projections. These statements involve significant risks,
uncertainties, contingencies and factors that are difficult or
impossible to predict and are beyond our control, and that may
cause our actual results, performance or achievements to be
materially different from those expressed or implied by the
forward-looking statements. Numerous factors could cause our actual
results, level of activity, performance or achievements to differ
materially from the results, level of activity, performance or
achievements expressed or implied by these forward-looking
statements including:
- our limited operating history under the CoolCo name;
- changes in demand in the LNG shipping industry, including the
market for modern TFDE vessels and modern 2-stroke vessels;
- general LNG market conditions, including fluctuations in
charter hire rates and vessel values;
- our ability to successfully employ our vessels;
- our expectations regarding the availability of vessel
acquisitions and our ability to exercise an option agreement with
affiliates of EPS to complete the acquisition of the Newbuild
Vessels that are scheduled to be delivered in the second half of
2024;
- changes in the supply of LNG vessels;
- our ability to procure or have access to financing and
refinancing, including financing for the Newbuild Vessels;
- our continued borrowing availability under our credit
facilities and compliance with the financial covenants
therein;
- potential conflicts of interest involving our significant
shareholders;
- our ability to pay dividends;
- general economic, political and business conditions, including
sanctions and other measures;
- changes in our operating expenses due to inflationary pressure
and volatility of supply and maintenance including fuel or cooling
down prices and lay-up costs when vessels are not on charter,
drydocking and insurance costs;
- fluctuations in foreign currency exchange and interest
rates;
- vessel breakdowns and instances of loss of hire;
- vessel underperformance and related warranty claims;
- potential disruption of shipping routes and demand due to
accidents, piracy or political events;
- compliance with, and our liabilities under, governmental, tax
environmental and safety laws and regulations;
- information system failures, cyber incidents or breaches in
security;
- changes in governmental regulation, tax and trade matters and
actions taken by regulatory authorities; and
- other risks indicated in the risk factors included in CoolCo’s
Annual Report on Form 20-F for the year ended December 31, 2022 and
other filings with the U.S. Securities and Exchange
Commission.
The foregoing factors that could cause our
actual results to differ materially from those contemplated in any
forward-looking statement included in this report should not be
construed as exhaustive. Moreover, we operate in a very competitive
and rapidly changing environment. New risks and uncertainties
emerge from time to time, and it is not possible for us to predict
all risks and uncertainties that could have an impact on the
forward-looking statements contained in this press release. The
results, events and circumstances reflected in the forward-looking
statements may not be achieved or occur, and actual results, events
or circumstances could differ materially from those described in
the forward-looking statements.
As a result, you are cautioned not to place
undue reliance on any forward-looking statements which speak only
as of the date of this press release. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise unless required by law.
Responsibility Statement
We confirm that, to the best of our knowledge,
the unaudited condensed consolidated financial statements for the
quarter ended March 31, 2023, which have been prepared in
accordance with accounting principles generally accepted in the
United States (US GAAP) give a true and fair view of the Company’s
consolidated assets, liabilities, financial position and results of
operations. To the best of our knowledge, the financial report for
the quarter ended March 31, 2023 includes a fair review of
important events that have occurred during the period and their
impact on the unaudited condensed consolidated financial
statements, the principal risks and uncertainties, and major
related party transactions.
May 23, 2023Cool Company Ltd.Hamilton,
Bermuda
Questions should be directed to:c/o Cool Company
Ltd - +44 207 659 1111
Richard Tyrrell - Chief Executive Officer |
Cyril Ducau (Chairman of the Board) |
John Boots - Chief Financial Officer |
Antoine Bonnier (Director) |
|
Mi Hong Yoon (Director) |
|
Neil Glass (Director) |
|
Peter Anker (Director) |
- Cool Company Ltd. Q1 2023 Business Update
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