Cool Company Ltd. Announces Time Charter

Rhea-AI Summary

Cool Company Ltd. (NYSE: CLCO / CLCO.OL) has entered into a 12-month time charter agreement for one of its TFDE vessels with Santos Shipping Singapore Pte Ltd. The vessel is expected to undergo an upgrade to LNGe specifications during the charter period, including reliquefaction capability, air lubrication systems, and other optimizations to enhance efficiency and reduce emissions. The charter includes an innovative mechanism to reward both the charterer and CoolCo, taking the fleet utilization to 100% until the end of the second quarter. The total operating revenue guidance for 1Q24 is $88-89 million and $84-85 million for 2Q24, subject to no technical off-hire. The anticipated lower revenue range in 2Q24 is primarily due to off-hire during a scheduled drydock of another vessel. The CEO, Richard Tyrrell, expressed delight with the innovative agreement, highlighting the alignment of incentives between the owner and charterer to enhance efficiency and minimize emissions.

Insights

Environmental Analyst

Cool Company Ltd.'s recent charter agreement indicates a strategic move towards sustainable maritime operations. The conversion of their vessel to LNGe specifications represents an industry trend towards environmental stewardship and compliance with international emissions standards. This transition not only aligns with global decarbonization efforts but also introduces operational efficiencies. The incorporation of reliquefaction capabilities and air lubrication systems suggests a significant reduction in the vessel's fuel consumption and greenhouse gas emissions. Such enhancements can lead to a competitive advantage in the shipping industry, where fuel efficiency and environmental compliance are increasingly important to charterers.

Furthermore, the innovative commercial mechanism that shares cost savings between CoolCo and the charterer due to lower emissions is a novel approach. It incentivizes both parties to prioritize energy efficiency and could set a precedent for future charter agreements. From an environmental perspective, this agreement could encourage other companies in the industry to adopt similar technologies and contractual frameworks, potentially leading to widespread environmental benefits.

Financial Analyst

The announcement by CoolCo of a new time charter agreement and vessel upgrades to LNGe specifications has direct financial implications. Firstly, the 100% fleet utilization rate until the next vessel becomes available is a positive indicator of strong demand for CoolCo's services, which is likely to support the company's revenue streams. The provided revenue guidance for the upcoming quarters, despite being lower in the second quarter due to scheduled maintenance, reflects management's confidence in the company's earning potential.

Investors should note the capital expenditures associated with the upgrades during the drydock period. While this may result in short-term financial pressure, the long-term benefits in terms of operational cost savings and potential higher charter rates due to improved vessel efficiency could outweigh the initial investment. The financial model that includes sharing the benefits of reduced emissions with charterers could also lead to more attractive and longer-term charter agreements, thereby enhancing revenue predictability.

Maritime Industry Analyst

The move by CoolCo to upgrade their TFDE vessel to LNGe specifications is indicative of broader shifts in the maritime industry. TFDE, or Twin Flex Diesel Electric propulsion, is already a relatively efficient technology in terms of fuel consumption and emissions. By further enhancing this with LNGe, or Liquified Natural Gas with enhanced environmental features, CoolCo is positioning itself at the forefront of next-generation shipping technologies. The maritime sector is under increasing pressure to reduce its environmental footprint and companies like CoolCo that invest in cleaner technologies are likely to find favor with environmentally conscious stakeholders, including regulators, customers and investors.

The anticipation of enhanced vessel performance after the upgrade is another key point. This suggests that the vessel will not only meet but potentially exceed current environmental and operational standards. The partnership with Santos Shipping Singapore Pte Ltd and the mention of a model for joint participation in the benefits of investment upgrades highlight an emerging trend in the industry towards collaborative efforts to achieve sustainability goals.

12-month charter adds to Company’s contracted backlog

Vessel to be converted to environmentally friendly LNGe specifications during charter period; innovative mechanism for lowering emissions and sharing cost savings

HAMILTON, Bermuda--(BUSINESS WIRE)-- Cool Company Ltd. (NYSE: CLCO / CLCO.OL, “CoolCo” or the “Company”) announced today that it has entered into a new time charter agreement for one of its TFDE vessels. The 12-month time charter is with Santos Shipping Singapore Pte Ltd and is scheduled to commence in the first quarter of 2024.

In the third quarter of 2024, the vessel is expected to undergo its scheduled drydock, at which time the Company also intends to upgrade the vessel to LNGe specifications. LNGe specification upgrades include the addition of reliquefaction capability via state-of-the-art sub-coolers, as well as air lubrication systems and a range of optimizations and upgrades intended to enhance efficiency and reduce emissions. In line with the anticipated enhanced performance profile of the vessel following the LNGe specification upgrades, the charter includes an innovative commercial mechanism to reward both the charterer and CoolCo.

The Santos charter takes CoolCo’s fleet utilization to 100% until our next vessel becomes available, not before the end of the second quarter. This enables CoolCo management to extend its total operating revenue guidance to $88-89 million for 1Q24 ($99 million 1Q23) and $84-85 million for 2Q24 ($90 million 2Q23), subject to no technical off-hire. The anticipated lower expected revenue range in the second quarter of 2024 is primarily related to off-hire during a scheduled drydock of another vessel that is expected to be completed within the same quarter. The 1Q23 comparison period includes a contribution from the Seal, a vessel that was sold in 1Q23.

“We are delighted with this innovative agreement that provides and aligns incentives between the owner and the charterer, which is expected to enhance efficiency and minimize emissions on one of our modern TFDE vessels,” said Richard Tyrrell, CEO of CoolCo. “This groundbreaking charter is the first to incorporate our LNGe upgrade and our first with Santos. It serves as a model for joint participation in the benefits of our investment in upgrading existing vessels.”

ABOUT COOLCO

CoolCo is an LNG Carrier pure play with a balanced portfolio of short and longer-term charters, the cash flows from which form the basis of the Company’s quarterly dividend for common shareholders. In addition to the built-in and funded growth from two newbuilds scheduled to be delivered in the second half of 2024, CoolCo’s strategy includes ongoing assessment of opportunities for vessel acquisitions and potential consolidation in a fragmented market segment. Through its in-house vessel management platform, CoolCo manages and operates its LNG transportation and infrastructure assets for a range of the world’s leading companies in addition to providing such services to third parties. CoolCo benefits from the scale and stature of Eastern Pacific Shipping and its affiliates, encompassing CoolCo’s largest shareholder and the owner of one of the world’s largest independent shipping fleets, which strengthen the Company’s strategic position with regard to shipyards, financial institutions, and access to dealflow. CoolCo supports the world’s decarbonization and energy security needs and has stated its intention to reduce its emissions by 10-15% through its LNGe upgrade program, as part of a fleet-wide improvement target of 35% between 2019 and 2030.

Additional information about CoolCo can be found at www.coolcoltd.com.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements which reflect management’s current expectations, estimates and projections about its operations and with respect to CoolCo’s agreement for a time charter of a vessel, including the terms of the charter with Santos, any expected benefits from the charter with Santos, revenue guidance forecasts, the expected drydocking schedule of our vessels, delivery dates of newbuilds, our strategy, our intention to reduce carbon emissions and any expected performance of our LNGe upgrade program, emissions reduction and improvement targets and other non-historical statements. Forward-looking statements are typically identified by words or phrases, such as “about”, “believe,” “expect,” “plan,” “goal,” “target,” “strategy,” “guidance” and similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These statements are based on current expectations, estimates, assumptions and projections and you should not place undue reliance on them. Forward-looking statements do not guarantee future performance and involve risks and uncertainties. There are important factors that could cause our actual results, level of activity, performance, liquidity or achievements to differ materially from the ones expressed or implied by these forward-looking statements. These risks and uncertainties include risks relating to future industry conditions, risks that revenue guidance forecasts may differ 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. These forward-looking statements are made only as of the date of this document. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

This information is subject to the disclosure requirements pursuant to Regulation EU 596/2014 (MAR) article 19 number 3 and Section 5-12 the Norwegian Securities Trading Act.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240206102199/en/

c/o Cool Company Ltd - +44 207 659 1111 / ir@coolcoltd.com

Richard Tyrrell - Chief Executive Officer

John Boots - Chief Financial Officer

Source: Cool Company Ltd.

FAQ

What is the ticker symbol for Cool Company Ltd.?

The ticker symbol for Cool Company Ltd. is CLCO / CLCO.OL.

What is the total operating revenue guidance for 1Q24?

The total operating revenue guidance for 1Q24 is $88-89 million.

What upgrades are planned for the vessel during the charter period?

The vessel is expected to undergo an upgrade to LNGe specifications, including reliquefaction capability, air lubrication systems, and other optimizations to enhance efficiency and reduce emissions.

What is the fleet utilization until the end of the second quarter?

The fleet utilization is at 100% until the end of the second quarter.

Who is the CEO of Cool Company Ltd.?

The CEO of Cool Company Ltd. is Richard Tyrrell.