Cool Company Ltd.: Navigating LNG Shipping’s Transition to Dominance

The global LNG shipping sector is at a pivotal crossroads. As demand for natural gas surges in Asia and Europe, and as regulators accelerate decarbonization mandates, operators must balance near-term headwinds with long-term opportunities. Among them, Cool Company Ltd. (CoolCo) stands out as a rare combination of operational resilience, strategic foresight, and capital discipline—qualities that position it to dominate as the LNG shipping market matures post-2025.

A Fleet Transformed: Efficiency as a Weapon

CoolCo’s modernization program is a masterclass in turning regulation into advantage. By retrofitting vessels like the Kool Husky, Kool Glacier, and Kool Kelvin with its proprietary LNGe technology, the company has slashed emissions by 10–15% while boosting fuel efficiency. These upgrades, completed or underway since late 2024, align perfectly with the International Maritime Organization’s 2030 carbon targets. The results are tangible: the Kool Husky, now optimized for low-emission voyages, has already secured premium charter rates post-upgrade, signaling market demand for cleaner assets.

This focus extends to newbuilds, which now form the backbone of CoolCo’s growth. The Kool Tiger and GAIL Sagar—both delivered in late 2024 and early 2025—are among the most efficient LNG carriers afloat, designed to serve high-growth markets like India. The GAIL Sagar, chartered to GAIL (India) Limited for 14 years with an option to extend, alone adds nearly $1.9 billion to CoolCo’s revenue backlog. Such long-term contracts (LTCs) now account for 85% of CoolCo’s total backlog, shielding it from volatile spot rates.

The Market’s Shift: Oversupply Now, Scarcity Later

The LNG shipping market faces a temporary “too many ships, not enough LNG” imbalance. Newbuild deliveries in 2024 outpaced LNG production growth, depressing spot rates and forcing some older steam turbine vessels into retirement. CoolCo’s Q4 2024 fleet utilization dipped to 92%, as older ships were repositioned or upgraded—a one-off cost but a necessary step toward a leaner, greener fleet.

Yet this pain is temporary. By 2025, new liquefaction projects like Plaquemines (U.S.) and LNG Canada will come online, absorbing excess tonnage and reducing spot market oversupply. CoolCo’s strategy of balancing LTCs (for stability) and spot exposure (for upside) ensures it can capitalize when rates rebound.

Financial Fortitude: Hedged Debt, Opportunistic Buybacks

CoolCo’s management has prioritized liquidity. A $570 million refinancing of its debt in late 2024 extended maturities to 2029, reducing refinancing risk. With ~$288 million in cash as of late 2024, the company is well-positioned to fund upgrades and seize accretive acquisitions.

The suspension of dividends in Q4 2024—a tough but prudent move—allowed CoolCo to preserve capital during the spot market slump. Investors should welcome this discipline: once rates stabilize, dividends will resume with greater strength, backed by a $1.9 billion revenue backlog. Meanwhile, the ongoing share repurchase program (targeting ~5% of its float) underscores management’s confidence in its valuation.

Why Invest Now?

CoolCo’s shares currently trade at a discount to peers due to near-term concerns over spot market weakness and repositioning costs. But this presents a once-in-a-cycle opportunity:
1. Structural Tailwinds: LNG demand is projected to grow at 3–4% annually through 2030, driven by India’s energy transition and Europe’s gas import needs.
2. Fleet Quality: Its LNGe-upgraded and newbuild fleet is among the youngest and most emissions-efficient in the sector.
3. Debt Management: Extended maturities and low leverage (debt-to-equity ~1.5x) minimize refinancing risks.
4. Optionality: The GAIL Sagar’s charter extension option and spot market exposure provide upside flexibility.

Risks and Realities

Critics will point to near-term headwinds: depressed charter rates in 2024, repositioning costs, and overcapacity concerns. But these are transient. The LNG shipping sector is undergoing a Darwinian shakeout: only operators with modern fleets and LTC-heavy backlogs will survive—and CoolCo is already there.

Conclusion: CoolCo’s Moment to Shine

The LNG shipping market’s transition to a low-carbon, demand-driven era is CoolCo’s to win. Its upgraded fleet, fortress balance sheet, and LTC-heavy backlog form a moat against competitors. As new LNG projects come online post-2025, the company’s shares could surge—if investors act now, before the market catches on.

Investment thesis: Buy CoolCo for a 30–40% upside by year-end 2026 as LNG demand surges and the company resumes dividends. The time to board this ship is now.