Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cool Co Ltd (CLCO, Financial) reached the upper end of its revenue guidance for the third quarter, supported by a $1.7 billion backlog.
- The company successfully refinanced its $570 million facility, extending maturity to 2029 and adding a revolving credit component with a 20 basis point cost saving.
- Cool Co Ltd (CLCO) introduced a $40 million share buyback program, providing an alternative channel for returning capital to shareholders.
- The company anticipates a strong long-term market for LNG, with expectations of increased shipping demand as new LNG projects come online.
- Cool Co Ltd (CLCO) maintains a solid liquidity position with approximately $200 million in available liquidity and an additional $120 million in borrowing capacity.
Negative Points
- The company experienced a disappointing start to the winter season, with spot market rates falling below levels not seen since 2018.
- Dividend was reduced to $0.15 per share, reflecting the impact of dry docking and the introduction of the buyback program.
- Net income was negatively impacted by a $15.5 million unrealized loss on interest rate swaps.
- The current market conditions have created a disconnect between LNG and LNG shipping markets, affecting short-term profitability.
- Cool Co Ltd (CLCO) faces challenges with older steam-turbine vessels, which are becoming less competitive due to environmental regulations and high operating costs.
Q & A Highlights
Q: Could you elaborate on the type of investments Cool Co Ltd is anticipating given the current market conditions?
A: Richard Tyrrell, CEO: We are strategically well-placed to consolidate the market and have set up the necessary infrastructure to seize opportunities as they arise. These opportunities could be asset-based or corporate in nature. Additionally, if our share price continues to trade below NAV, the buyback program could also be considered an opportunity.
Q: What makes you confident that now is a good time to invest?
A: Richard Tyrrell, CEO: The long-term market outlook is exceptionally strong. The short-term market is experiencing a period of indigestion due to vessels arriving ahead of projects and older vessels being phased out. This dynamic may prompt those with weaker balance sheets to sell, creating opportunities for us.
Q: Are you open to selling ships in the current market, such as the new build without a firm contract?
A: Richard Tyrrell, CEO: We aim to buy low and sell high. While selling ships is not off the table, our newbuild program is part of our fleet renewal strategy. If we were to sell a new build, it would likely be with the intention of purchasing more vessels down the line.
Q: With the current softness in the spot market, what is the appetite for long-term charters?
A: Richard Tyrrell, CEO: There is a bid-ask spread for medium-term charters (1 to 3 years), so not many deals are closing. However, for long-term charters, like the one we did with GAIL, the market is less liquid but still active, with recent deals for 2027 delivery in the high 80s.
Q: Do you expect the trend of scrapping older steam-turbine vessels to accelerate and tighten capacity in 2025?
A: Richard Tyrrell, CEO: Yes, we expect this trend to accelerate. As more efficient vessels become available at competitive prices, older vessels will fall out of the fleet. This will eventually lead to these older ships being scrapped or sitting idle.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
