Cool Company Ltd. (CLCO -1.63%) reported Q1 2025 results on May 21, 2025, highlighted by stable fleet employment, robust contracted backlog, and disciplined execution despite continued spot market weakness. Revenues marginally increased versus Q4 2024, offset by temporary voyage and repositioning costs, while the company executed critical fleet drydocks and in April and May repurchased 1.3% of its shares at a discount to NAV. Select insights below address strategic backlog strength, imminent LNG macro catalysts, and disciplined capital allocation as competitive moats.
Backlog Strength and Contract Cover Buffer Earnings Amid Spot Market Weakness
With 83% of 2025 vessel days covered and an average firm and floating backlog TCE (time charter equivalent) of $78,000/day as of March 31, revenue visibility contrasts sharply with volatile spot market rates and recent repositioning expenses. The company's 59 vessel-years of contracted backlog as of March 31 includes both fixed and upside-sharing charter arrangements, positioning it to capture recovery without overexposing to market troughs.
"As of March 31, our total contracted revenue backlog exceeded $1.6 billion, including all extension options. This represents approximately 59 vessel years of backlog. Or an average of four and a half years per vessel across our fleet."
-- John Boots, CFO
This high forward coverage shields near-term earnings and cash flow from near-cycle volatility, supporting a stable operating base while granting the flexibility to add upside exposure as market fundamentals improve.
Expected LNG Supply Surge Sets Up Tailwinds
The anticipated LNG supply growth of over 20% from 2024 levels by the end of 2026 and additional 6%-10% in subsequent years marks an inflection from the flat production environment of 2023-2024. Rising Asian demand and restored trade flows away from Europe are critical drivers, given that cargoes routed to Asia amplify ton-mile demand.
"In total, LNG supply is projected to increase by over 20% from 2024 levels by the end of 2026. With a further 6% growth in 2027 and an additional 10% growth in 2028. This is the wave of supply that the LNG shipping industry is ramping up to transport."
-- Richard Tyrrell, CEO
The imminent jump in both LNG production and longer-haul trade routes builds a multiyear tailwind for vessel utilization and charter rates, favorably positioning the company for a structurally tighter shipping market.
Disciplined Capital Allocation and Fleet Optimization Support Shareholder Value
Liquidity stood at $256 million, including cash and undrawn facilities, as of March 31, and management -- after the quarter ended -- initiated share repurchases of approximately 692,000 shares at an average price of $5.59 per share, substantially below NAV. Accretive buybacks during market dislocation and prudent approach to new vessel acquisitions highlight a commitment to capital discipline.
Looking Ahead
Management forecasts continued operational efficiency gains from performance upgrades and expects the remaining planned drydocks to further support EBITDA and reduce off-hire days. Coverage for 2025 is at approximately 83%, while looking out through 2026 and 2027 shows roughly 72% and an average of 63%, respectively, with significant upside as new LNG supply and longer-haul trades materialize.