Cool Company Ltd.'s Q1 2025 Earnings Call: Conflicting Insights on Long-Term Charters and Financial Flexibility
Earnings DecryptWednesday, May 21, 2025 1:31 pm ET
2min read
Interest in long-term charters and balance sheet strength and financial flexibility are the key contradictions discussed in Cool Company Ltd.'s latest 2025Q1 earnings call.
Rate Pressures and Market Rebalance:
- CoolCo reported an average TCE of $70,600 per day, lower than the previous quarter, primarily due to increased repositioning expenses.
- This decline in rates is attributed to an oversupply of vessels and the temporary shift of cargoes to Europe, but the market is expected to rebalance as new LNG supply comes online.
New LNG Supply and Market Catalysts:
- The LNG shipping industry anticipates a wave of new supply, with projections of over 20% increase in LNG supply from 2024 levels by the end of 2026.
- This increased supply, along with the displacement of older vessels by more efficient newbuilds, will help absorb the excess tonnage and drive market recovery.
Backlog and Chartering Strategy:
- CoolCo's total contracted revenue backlog exceeded $1.6 billion, representing approximately 59 vessel years of backlog.
- The company is pursuing a portfolio strategy to manage risk, fixing vessels with limited exposure while capturing upside opportunities on others, ensuring strong backlog coverage.
Dry Dock Program and Efficiency:
- CoolCo completed several dry docks, including performance upgrades, which has reduced average vessel operating expenses to $16,300 per day per vessel.
- This trend is expected to continue, supporting the company's operational efficiency and EBITDA going forward.
Rate Pressures and Market Rebalance:
- CoolCo reported an average TCE of $70,600 per day, lower than the previous quarter, primarily due to increased repositioning expenses.
- This decline in rates is attributed to an oversupply of vessels and the temporary shift of cargoes to Europe, but the market is expected to rebalance as new LNG supply comes online.
New LNG Supply and Market Catalysts:
- The LNG shipping industry anticipates a wave of new supply, with projections of over 20% increase in LNG supply from 2024 levels by the end of 2026.
- This increased supply, along with the displacement of older vessels by more efficient newbuilds, will help absorb the excess tonnage and drive market recovery.
Backlog and Chartering Strategy:
- CoolCo's total contracted revenue backlog exceeded $1.6 billion, representing approximately 59 vessel years of backlog.
- The company is pursuing a portfolio strategy to manage risk, fixing vessels with limited exposure while capturing upside opportunities on others, ensuring strong backlog coverage.
Dry Dock Program and Efficiency:
- CoolCo completed several dry docks, including performance upgrades, which has reduced average vessel operating expenses to $16,300 per day per vessel.
- This trend is expected to continue, supporting the company's operational efficiency and EBITDA going forward.
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