Cool Company Ltd. Q1 2025 Business Update

Cool Company Ltd. (CoolCo) reported Q1 2025 operating revenues of $85.5 million, a slight increase from $84.6 million in Q4 2024, while net income decreased to $9.11 million from $29.41 million due to unrealized mark-to-market changes on interest rate swaps. Average Time Charter Equivalent Earnings (TCE) fell to $70,600 per day from $73,900 per day in the previous quarter, impacted by repositioning expenses, though the company secured new charters and completed drydocks, also repurchasing 692,180 shares at an average price of $5.59. CoolCo anticipates a tightening market driven by increased LNG volumes and the expected scrapping of older vessels, expecting positive impacts from normalized cargo flows between Europe and Asia.

Analysis

Cool Company Ltd. (CoolCo) reported Q1 2025 results showing total operating revenues of $85.5 million, a marginal increase from $84.6 million in Q4 2024, while net income significantly decreased to $9.11 million from $29.41 million sequentially, largely due to unrealized mark-to-market losses on interest rate swaps amounting to $3.8 million in Q1 versus an $11.0 million gain in Q4 2024. Average Time Charter Equivalent (TCE) earnings fell to $70,600 per day from $73,900 per day in the prior quarter, attributed to increased repositioning expenses for the newbuild GAIL Sagar and another vessel, contributing to an adjusted EBITDA of $53.4 million, down from $55.3 million in Q4 2024. Fleet utilization was 88%, a decrease from 92% in Q4 2024, reflecting these repositioning activities and the delivery of the GAIL Sagar which commenced a 14-year charter.

Despite these immediate financial pressures, CoolCo made operational strides, including securing new charters for two redelivered vessels post-LNGE upgrades and progressing with drydocks, with only two TFDE vessels remaining. The company acknowledged a challenging Q1 spot market due to high LNG prices diverting cargoes to Europe, negatively impacting ton-mile demand. However, management expressed a positive outlook, anticipating a tightening market driven by a significant increase in LNG volumes from new projects commencing this year, the normalization of LNG cargo flows between Europe and Asia, and the expected scrapping of older steam turbine vessels. CoolCo's ongoing share repurchase program, under which 692,180 shares were bought back at an average of $5.59, underscores a commitment to shareholder value amidst these market dynamics.

Key Decisions for Investors

• Investors should weigh the current earnings impact from challenging spot market conditions and one-off costs against the company's proactive fleet management, including new long-term charters and LNGE upgrades.
• Closely monitor the projected tightening of the LNG carrier market, driven by new LNG supply projects coming online and the expected scrapping of older vessels, which CoolCo anticipates will improve chartering opportunities.
• Consider the company's strategic positioning with a relatively modern fleet and its success in securing term employment, which aims to mitigate spot market volatility and enhance long-term revenue visibility.
• The active share repurchase program indicates management's confidence and could provide support to shareholder returns, while the company maintains a disciplined approach to capital allocation.