Cool Company is 'ere

Investment Analysis Clubs Value Hounds
1

A Cool Company is now trading on the NYSE
The Cool Company is now trading on the NYSE
LNG tanker company Cool Company (CLCO) secured a NYSE listing and has been trading on the NYSE for about 2 weeks.

If one has followed the Golar LNG (GLNG) threads, here or elsewhere, then one knows that Cool Company started out owning a majority of GLNG’s tankers (8 Tri-Fuel Diesel Electric [TFDE] ). From Golar, CLCO also acquired a vessel management staff. That team handle both LNG tankers as well as Floating Storage & Regasification Unit (FSRU). All this occurred the first half of 2022.

During the second half of 2022, Cool Company had two (or maybe I should say, “at least two” ) significant events.

  1. In early Nov 2022, CLCO completed a deal involving 4 SPVs (Special Purpose Vehicles) - each SPV owning an LNG tanker.
  2. Signed purchase options on 2 LNG newbuilds with 2024 delivery times.

All this occurred while Cool Company traded on the Euronext or Norwegian indices. Cool Company sought and obtained a NYSE listing, and now trade directly in the US markets. I had “kicked the tires” a little when CLCO had released their Q4 2022 results. Did some additional digging and discovered that, on the fleet management side, the company also manages vessels for others - for Energos, for Avenir, for Golar (at least for now).

CLCO core business is the LNG tanker segment. The SPV acquisitions appear to be quite timely - $660M for modern and/or high spec assets.
Yes, the company recently sold an LNG tanker (Golar Seal). But it was Cool Company’s oldest asset, and the company sold the vessel for $184.3M - I might add, a timely and profitable transaction, given
a. the vessel has an upcoming dry-docking event
b. CLCO acquired their initial fleet when the LNG tanker market was more subdued.

Viewed another way, after paying off the debt on the vessel, CLCO have enough cash to cover most of the equity on two LNG tanker newbuilds that deliver in 2024. I think that’s good business.

Most recent quarterly report
Cool Company Ltd. Q4 2022 Business Update | Coolco (coolcoltd.com)

CLCO recently paid its first dividend. As a European-based company, the dividend model is usually a one-time or two-time payout in an annual cycle. With a NYSE listing, the company might choose a quarterly model. I don’t know - that’s a TBD. CLCO already have at least two medium (3-year terms) deals. Probably just need a couple more medium term deals to be able to support a small, but consistent payout.

Insider ownership: About half the company is owned by the Ofer family (depending on one’s experience with other Ofer family holdings, that could be good or bad)

Obviously, one year is not enough data to go on. But, in the current environment, layering a few medium (3-to-5-year) charters on top of existing charters could stabilize the revenue base and margins, for a few years, and might make CLCO appealing.

HoHumYNWA - no positions currently, but very tempted to put a marker.

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Aha! … HoHumYNWA has more data.

The Q4 2022 link had some data regarding the SPVs. The four vessels would add $370M worth of backlog. Helpful as a stand-alone datapoint. But not useful. How many vessel years is that? That would be more helpful.

I started doing estimates.
10 tanker years - would put the charter rates @ > $100K daily
20 tanker years - would put the charter rate @ > $51K
But two of the vessels are two-stroke X-DF and delivered within the last couple of years. Not impossible. But low probability the prior owner would have accepted a low rate for an X-DF.

Digging back, Cool Company did provide better data – in the Q3 report
"The average remaining duration of the four charters to Shell is around 3.7 years excluding option periods (equivalent to a Revenue backlog1 of approximately $380 million) and 11.7 years inclusive of options (equivalent to a Revenue backlog1 of approximately $1.2 billion). "

Cool Company Ltd. Q3 2022 Business Update | Coolco (coolcoltd.com)

So, a better picture emerges

  • 4 vessels with around 3.7 years of charter @ ~$70K daily
  • a 1-year charter @ $140K daily
  • 2 vessels with 3-year charters @ $120K daily
  • 2 vessels available for charter in 2023 (my suspicion is Golar Seal is one of those vessels)

The charterer on the first four vessels is Shell. I wonder if the option years have any rate escalation clauses? Not saying $70K daily is a bad medium term rate. Just that it might adjust CLCO’s mgmt thinking on the charter strategy for the balance of the fleet. Especially when an LNG tanker owner can get $120K daily on a slightly shorter term.

In any case, terms for 7 of 11 vessels are known

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