Cool Company Ltd. (CLCO) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance with increased EBITDA and net income, and a successful share buyback program. The Q&A session revealed optimism in the charter market and asset management, though some details were vague. The positive sentiment from the liquefaction side and strategic asset management indicates potential growth. Despite minor declines in TCE, the overall financial health and strategic initiatives suggest a positive outlook. The company's liquidity position and operational efficiencies further support a positive sentiment.
Key Financial Performance
Average TCE (Time Charter Equivalent) $69,900 per day in Q2 2025, slightly down from $70,600 in Q1 2025. The modest decline reflects the GAIL Sagar's higher TCE being more than offset by lower rollover rates on open vessels.
Total Operating Revenue $85.5 million in Q2 2025, steady compared to Q1 2025. The revenue was supported by fewer drydock days and a full quarter of the GAIL Sagar contributions, offset by lower average TCEs across the rest of the fleet.
Adjusted EBITDA $56.5 million in Q2 2025, up from $53.4 million in Q1 2025. The increase was largely due to the absence of voyage-related expenses tied to newbuilds in January 2025.
Net Income $11.9 million in Q2 2025, an increase of $2.8 million from Q1 2025. This was impacted by less unrealized interest rate losses on swaps.
Operating Margin 43% of operating revenues in Q2 2025, reflecting strong operational performance.
Vessel Operating Expenses $15,900 per day per vessel in Q2 2025, a decrease from both Q1 2025 and the 2024 average of $17,300 per day. The decrease is attributed to operational drydock efficiencies and economies of scale.
Cash and Cash Equivalents $109 million as of June 30, 2025. Total available liquidity, including undrawn credit, was $226 million, providing flexibility for market volatility and opportunistic actions.
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Operating Highlights
Delivery of Kool Tiger and GAIL Sagar: Contributed to a modest year-on-year increase in EBITDA despite a challenging market.
LNG-E vessels upgrades: Upgrades save up to 30% in annual fuel consumption and emissions, enhancing operational efficiency.
LNG supply increase: Projected 23% and 39% increase in LNG supply by 2026 and 2028, respectively, driven by projects like Golden Pass, Louisiana LNG, and others.
Market balancing: Idling and scrapping of older vessels are helping balance the LNG shipping market.
Spot market activity: Active in the spot market to maintain full employment despite low rates.
Dry dock upgrades: Completed 9 dry docks, including performance upgrades, reducing vessel operating expenses to $15,900 per day.
Interest rate swaps: Entered into additional swaps, reducing exposure to floating rates and achieving 75% hedged debt.
Share buyback program: Repurchased 859,000 shares at an average price of $5.77 per share, reducing total share count by 1.6%.
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Risk or Challenges
Spot Market Challenges: The company is facing difficulties in securing satisfactory rates in the spot market due to a glut of ships and high levels of newbuild deliveries. This has led to unsatisfactory rates and increased competition.
Charter Roll-Offs: Several vessels are rolling off their elevated rate charters and transitioning to lower rate deals, significantly impacting revenue. For example, two vessels are expected to see a drop of over $100,000 per day in Q4.
Drydock Costs and Off-Hire Days: The company has incurred significant costs and off-hire days due to drydocking activities, which have impacted operational efficiency and financial performance.
Idling and Scrapping of Older Vessels: A significant number of older steam turbine vessels are idle, and the market is grappling with the challenge of balancing these vessels with newer tonnage. Reactivations are unlikely due to high costs.
Interest Rate Exposure: Although the company has hedged 75% of its debt, it remains exposed to floating interest rates, which could impact financial stability if rates rise unexpectedly.
Economic Breakeven in Spot Market: Spot market rates are currently below economic breakeven levels, posing a challenge for the company to maintain profitability in the short term.
European LNG Storage Levels: European LNG storage levels are lower compared to previous years, which could impact ton miles and create tension in cargo competition between basins.
Sublet Pressure on Long-Term Market: Sublets are weighing on the 12-month market, making it challenging to secure favorable long-term charters for vessels.
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Guidance & Outlook
LNG Supply Projections: LNG supply is expected to increase by 23% by the end of 2026 and 39% by the end of 2028 compared to 2024 levels. This growth is driven by projects like Golden Pass, Louisiana LNG, Calcasieu Pass 2, and Argentina LNG.
Market Balancing and Vessel Idling: The idling of older steam turbine vessels is helping the market find balance. Approximately 50 out of 215 steam turbine vessels are currently idle, with more expected to phase out as they roll off charters.
Spot Market and Rate Trends: Spot market rates are gradually recovering, but high levels of newbuild deliveries continue to weigh on rates. The company anticipates a continuation of gradual rate improvements and hopes for winter seasonality to positively impact rates in 2025.
Future Vessel Employment: Two vessels will be redelivered from existing contracts in Q3 2025, with spot voyages already secured. However, average TCE rates are expected to decline significantly in Q4 2025, with a potential drop of over $100,000 per day for two vessels.
Long-Term Market Outlook: The company expects a more balanced LNG shipping market by 2027, supported by its chartering backlog, which covers 50% of days until 2027.
Capital Structure and Interest Rate Management: Approximately 75% of the company's total debt is hedged or fixed, with an average interest cost of 5.6%. The company plans to selectively add further interest rate swaps as opportunities arise.
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Shareholder Return Plan
Share Buyback Program: Since April 25, we have repurchased shares under our previously announced buyback program. As of August 22 this year, we bought back approximately 859,000 shares at an average price of $5.77 per share, well below our net asset value per share, reducing our total share count by 1.6%. Looking ahead, the pace and the size of further repurchases will depend on market conditions and the company's financial position.
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Key Q&A
Q:How has recent activity in the liquefaction side, including SPAs, FIDs, and the U.S.-EU energy deal, impacted sentiment within the charter market?
A:The positive news flow has started to get people focused on their long-term shipping needs, although it is still early days and some are bottom fishing.
Q:Can you provide details on potential asset acquisitions?
A:There is nothing concrete at this point. The company is always looking at acquisitions, whether companies or vessels, but no firm opportunities currently exist. They have flexibility with the RCF to act when the right opportunity arises.
Q:Are you satisfied with the return on the $10 million investment in vessel upgrades?
A:Yes, the return has been good. They are currently getting $5,000 per day and potentially more in the future. Combining cash flows with the benefits of extending vessel life results in decent returns.
Q:Did you change your drydocking schedule based on the weaker chartering environment?
A:No significant changes were made. Drydocking is typically done in shelter seasons, and they are pleased to have completed most of the drydocks during a period of low opportunity cost.
Q:How far along is the LNG-E upgrade program, and what is the total CapEx spend?
A:Four out of five upgrades are completed, with the last one scheduled for Q4. The upgrades cost about $10 million each, and most down payments have already been made.
Q:When do you see the balance shifting from Europe to Asia with more U.S. volumes heading east?
A:The macro shift might be further out, but shorter-term volatility could cause vessels to head east sooner. Factors include outages, storage refilling, and market jumpiness. The exit of older steam turbine vessels is also supporting the market.
Q:How many steam turbine ships are still active, and what is their role in the spot market?
A:Around 150 steam turbine ships remain, but many are idled or underutilized. Once they reach the end of their charter periods, they are likely to be scrapped.
Q:Can you share details about the 3-year variable charter announced?
A:The charter is tied to an index and tracks broker charts for similar vessels. The floor is $20,000, and the ceiling is $100,000, excluding the upside from upgrades.
Q:What drives the $10,000 per day upside from vessel upgrades?
A:The upside is driven by savings from running subcoolers below natural boil-off speed and avoiding gas wastage. The price of LNG also plays a role, with higher prices increasing the value of the upgrades.
Q:What is the plan for ships coming off contracts in 2026?
A:The company is considering a range of options, including spot trading, short-term charters (12-18 months), and potentially longer-term deals for two-stroke vessels. The market for longer-term charters is more robust than for spot or short-term charters.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the index tied to the 3-year variable charter and did not elaborate on the exact timing of the macro shift from Europe to Asia for U.S. volumes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ABG Sundal
ASA Research
Activity charterers
Alexander Bidwell
Argentina LNG
Bidwell Unidentified
Chief
CoolCo fleet
CoolCo presentation
LNG shipping
LNG upgrade
Officer
Research Division
TFDE vessel
backlog chart
chart term
competition
detail
difference
dock
effect
fact
kind winter
market balance
market rate
market vessel
perspective
picture
reminder
shipping market
side
stroke
summer
term market
tonnage
vessel market
vessel spot
winter seasonality
CLCO Transcript
Cool Company Ltd. (CLCO) Q2 2025 Earnings Call Transcript
Positive8-28
The earnings call summary shows strong financial performance with increased EBITDA and net income, and a successful share buyback program. The Q&A session revealed optimism in the charter market and asset management, though some details were vague. The positive sentiment from the liquefaction side and strategic asset management indicates potential growth. Despite minor declines in TCE, the overall financial health and strategic initiatives suggest a positive outlook. The company's liquidity position and operational efficiencies further support a positive sentiment.
Cool Company Ltd. (CLCO) Q1 2025 Earnings Call Transcript
Unknown5-21
The earnings call reveals mixed signals: while there's a strong backlog and liquidity position, financial metrics like net income and EBITDA have declined. The Q&A indicates interest in longer-term charters and potential market opportunities, but also highlights geopolitical and economic pressures. The share repurchase program is a positive factor, but increased expenses and financial risks temper optimism. Overall, the neutral sentiment reflects balanced positive and negative factors, with no clear catalyst for significant stock movement.
Cool Company Ltd. (CLCO) Q4 2024 Earnings Call Transcript
Unknown2-27
The earnings call summary reflects several challenges: the chartering market is at historic lows, supply chain issues, and geopolitical tensions. Although financial metrics like revenue and EBITDA have improved, the lack of dividend declaration and unclear guidance on vessel usage and charters are concerning. The Q&A section reveals management's evasive responses, particularly on layup costs and charter commitments, further adding to negative sentiment. Despite financial flexibility and a strong backlog, the market's current state and management's unclear communication suggest a negative stock price reaction in the short term.
Cool Company Ltd. (CLCO) Q3 2024 Earnings Call Transcript
Unknown11-22
The earnings call summary highlights several negative factors: reduced dividends, significant unrealized losses, and market oversupply impacting rates. Despite some positive elements like increased revenue and cash position, the Q&A session reveals concerns about market conditions and unclear strategies. The negative sentiment is further reinforced by regulatory challenges and economic factors, leading to a cautious outlook. The share buyback program is a positive, but overall, the sentiment leans negative due to financial risks and market volatility.
CLCO Report
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