Cool Company Ltd.'s Q2 2025: Contradictions Emerge on Charter Market Sentiment and Asset Acquisition Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: CHF 85.5M, in line with Q1 and above prior guidance
• Operating Margin: 43% of operating revenues

Guidance:

• Q3 total operating revenues expected similar to Q2 (~CHF 85.5M).
• Blizzard and ICE roll off long-term charters in late September; Q4 rates for these two will be down “well over $100,000/day.”
• Two vessels redeliver late Q3 with first spot voyages secured, pressuring average TCE.
• Two remaining dry docks over the next couple of quarters.
• 50% of fleet days covered through 2027; expect a more balanced market by then.
• Average interest cost ~5.6%; ~75% of debt hedged; may add swaps if terms improve.

Business Commentary:

* EBITDA Growth and Market Conditions: - CoolCo reported adjusted EBITDA of CHF 56,500,000 for Q2 2025, modestly up year-on-year. - The growth was supported by the delivery of new vessels like the Cool Tiger and Gale Saga, despite a challenging market with low rates and competition.

• Vessel Utilization and Dry Docking:
• The company has concluded nine drydocks, including performance upgrades on four vessels, with average vessel operating expenses decreasing to CHF 15,900 per day.

• This was part of their strategy to extend vessel life and improve efficiency, offsetting the impact of poor spot market rates.

• LNG Supply and Market Balance:

• CoolCo highlighted a significant increase in LNG supply, with a 2339% increase in supply by 2026 and 2028 compared to 2024 volumes.

• The company expects this supply increase to help balance the LNG shipping market, although short-term market conditions remain challenging.

• Charters and Backlog Strategy:

• The company's backlog provides support during market volatility, with 50% of days covered until 2027.
• This strategy has helped mitigate the impact of low spot market rates and shallow long-term charter markets.

Sentiment Analysis:

• “Total operating revenue remained steady at $85,500,000 and adjusted EBITDA was up at $56,500,000 versus $53,400,000 in the first quarter.” Management noted “rates remain low… levels remain unsatisfactory.” Guidance: “For Q3, we anticipate total operating revenues to be at a similar level as Q2,” but “we’re likely to be down well over $100,000 per day across these two vessels come Q4.”

Q&A:

• Question from Alexander Bidwell (Weber Research Advisory): How have recent U.S. LNG SBAs/FIDs and the U.S.-EU energy deal affected charter-market sentiment and discussions?
  Response: Positive news is prompting early inquiries for long-term shipping, though some activity is still opportunistic.

• Question from Alexander Bidwell (Weber Research Advisory): Any specifics on potential asset acquisitions you’re evaluating?
  Response: No active deals; the team continuously screens opportunities and has RCF flexibility.

• Question from Liam Burke (B. Riley): Are you satisfied with returns from the four vessel LNG-E upgrades?
  Response: Yes—about $10M per ship, yielding ~+$5k/day premiums with potential upside and life-extension benefits.

• Question from Liam Burke (B. Riley): Did you adjust drydock timing given weak charter rates and expected improvement into 2026?
  Response: No major changes; drydocks scheduled in shoulder seasons are mostly complete, reducing future off-hire.

• Question from Frode Markedahl (Clarksons Securities): Status and economics of the LNG-E upgrade program and how the ~$5k/day premium is derived?
  Response: Four of five upgrades finished; final in Q4. Cost ~$10M each. Three ships have upside-sharing (~$5k/day to CorCo); two Shell-chartered ships received fixed compensation.

• Question from Frode Markedahl (Clarksons Securities): When might U.S. volumes shift from Europe to Asia?
  Response: Timing is uncertain; near-term events could send more cargoes east, while steam-vessel exits aid a gradual rebalancing.

• Question from Frode Markedahl (Clarksons Securities): Role of steam-turbine ships in the spot market and likelihood of idling/scrapping?
  Response: They’re often idled or underutilized; many will not find re-employment post-charter and are likely to be scrapped.

• Question from Peter Hagen (ABG): Can you detail the 3-year variable charter structure—index, floors, ceilings?
  Response: It’s index-linked; floor around $20k/day (excluding upgrade upside) and ceiling around $100k/day, tracking broker benchmarks.

• Question from Peter Hagen (ABG): Quantify upgrade upside and key drivers (e.g., LNG prices)?
  Response: Total value ~+$10k/day with CorCo’s share ~+$5k/day; driven by subcoolers reducing GCU use at low speeds and by LNG prices.

• Question from Peter Hagen (ABG): Strategy for vessels rolling off contracts through 2026—spot vs term?
  Response: TFDEs likely mix of spot/12–18m terms given shallow long-term market; two-strokes target 5–12y deals with improving inquiry levels.