Operator: Hello, and thank you for standing by. I would like to welcome everyone to the Cool Company Limited's Q4 2024 Business Update. I would now like to turn the call over to our CEO, Richard Tyrrell. Please go ahead.

Richard Tyrrell: Hello, and welcome to CoolCo's presentation of the fourth quarter 2024.

Thank you, Justin, for the introduction. Please turn to Page 3, CoolCo at a glance. The quarter was decent, even though the chartering market for new business is another story. From a rate perspective, winter was cancelled this year, and we're contending with the lowest rates we have ever seen on our two spot market vessels. We have a reasonably well-paced portfolio of charters and over $1 billion in firm backlog.

But this does not take away our exposure to vessels that come open over time. While rates languish at below economic breakeven on open days, we have decided not to declare a dividend. Instead of predicting the timing of when markets normalize and risk getting it wrong, not declaring a dividend at this time provides the combined benefits of financial flexibility and creating capacity for opportunistic growth. We have a good track record in this area, and it's the kind of market where opportunities are likely to come along. For the quarter, revenue was up slightly and the hard work of our chartering team enables us to guide towards similar levels for the first quarter 2025.

We're going to get into the drivers of this market and when conditions are likely to normalize in the presentation. While we've often talked about how the market will rebalance in theory, this quarter, we have some real data to show how it's happening in practice. Turning to Page 3 and the quarterly highlights. Our portfolio of charters has provided solid support in the face of a rapidly deteriorating market. We see the impact of this market on our TCE after the Kool Tiger delivered in October and undertook a positioning voyage to the Atlantic Basin before being faced with the spot market rates that prevail.

The same applied on the Glacier after redelivered in the quarter. The positioning voyage also had an impact on fleet utilization, and we shall see the same in the first quarter because of the positioning voyage on the Gale Saga. However, in stark contrast, the Saga has delivered onto its 14 year charter and has recently lifted its first cargo from Cove Point. As mentioned, revenue increased for the quarter to $84.6 million, primarily because of fewer drydock days. Adjusted EBITDA also increased modestly to $55.3 million.

The backlog remains strong at $1.7 billion, of which over $1 billion is firm. Turning to Page 4, and we see the picture of the current market. It's a market that requires agility, differentiated vessels and strong customer relationships. Rates are well below breakeven. It's not unusual for them to be low at this time of year.

But what was unusual is the complete lack of a winter market. This year's winter blew through the floor of anything we have seen for many years. The Tiger and the Glacier have been exposed to this market, but we've managed to keep them employed, achieving 92% utilization in the fourth quarter, and we expect to beat this in the first quarter of 2025. Sustained high LNG prices in Europe, the resulting trading patterns and the delivery of new vessels have put significant downward pressure on the near-term chartering market. Adding to this pressure has been the number of sublets in the market.

These vessels are delivered ahead of the projects for which they are intended and are typically chartered out into the market without much consideration of rate, something that is negative for sentiment. With headline rates at these levels, longer-term deals are few and far between. The spread between spot levels and the levels required to commit a vessel on a term basis are simply too great. CoolCo is seeking to bridge such conditions through a combination of spot, short-term and floating rate deals. John has a breakdown of our backlog on one of his slides.

In the next slide, we have our observations from the market. Turning to Page 5. We see a list of new supply in 2025, that was the case until Costa Azul announced a delay of a few months earlier this week, and you see that now slipping until 2026. While this story of delays is getting old, it does mean that precision around timing is important when thinking about the shipping market. The most significant near-term projects we see in the market are Venture Global.

The first Calcasieu Pass moved to commercial operations in April. And while the plant has been operating for some time, it's only now that the vessels that were originally intended for lifting its cargoes will be doing so. Removing such vessels from the sublet market is going to help and the pattern will be repeated as more projects come online. Plaquemines is the other Venture Global project that will be a major contributor over the coming months. It's up and running, and I think they're up to around 15 cargoes so far.

Corpus Christi Stage 3 Trains 1 to 4 is coming on stream steadily over the course of 2025. LNG Canada is a big project for the middle of the year. And on the back end, we have a handful of projects, including the first of the Qatari North Field expansion projects potentially. Because a number of these projects only start at the back end of the year, the ton-mile development is only expected to be 4% in 2025. But 2026 is a different story where we see the full benefit of annual production flowing into the 17% expected growth.

Shell, one of CoolCo's customers, published its 2025 LNG outlook earlier this week and commented on seeing 600 million tonnes per annum of demand by 2030, increasing to up to 700 million tonnes per annum of demand by 2040. This demand will ultimately be a huge opportunity for CoolCo. Shell also had a list of the delay factors that we're all too conscious of, geopolitical tensions, regulatory hurdles, start-up risks, civil unrest, labor shortages and supply chain bottlenecks. None of these are going away, and the industry needs to become better at factoring them into their fleet plans. However, it is very reassuring to see Shell's 2040 projection and how it is aligned with our long-term view of the LNG market.

Page 6 looks at the developments in idling and newbuilds. I have long said that steam turbine vessels leaving the fleet will eventually balance the market, and we're starting to see it in the data. The chart on the left hand side of the page shows how closely idle vessels are correlated with vessels reaching 20 years in age. What's happening here is that vessels are rolling off their initial contracts and immediately being idled rather than dry docked. All are now warm stacked at best and are likely to play an active role in the market going forward.

The number of vessels reaching 20 years in age is set to increase over the coming year, and these vessels are not being scheduled to lift cargoes. This is enabling the customers to specify larger cargoes for which our TFDE vessels are the ship of choice. CoolCo vessels are particularly attractive because of their size and also the upgrades that we're in the course of progressing. These specifications make them ideal replacement vessels for the steam turbine vessels that are leaving the fleet, leaving us well positioned to take over such business. Just as steam turbine vessels reach retirement, newbuild orders have all but dried up, but this is only natural in the current rate environment and obviously, a good thing for vessels that are already on the water when thinking about the years ahead.

Moving to Page 8. We have some other factors that explain the part of the other things that are impacting the market. And here, we think about how changes could improve matters. The swift onset of poor market conditions could be quickly reversed, and let's think about how. Well, firstly, increased LNG supply, resulting in lower prices will create demand in the price sensitive markets, especially the Asian markets, which are more distant and therefore, require more shipping.

Geopolitics can have an impact, too. China, at the moment take only 5% of U.S. LNG volumes. And that clearly needs to adjust as trade rebalances. The return of limited Russian gas to Europe will result in less demand in Europe, and we see U.S.

LNG traveling further. So again, something that's positive for shipping. Floating storage could increase as a result of contango trades reappearing. And that's in a market where seasonality now can apply not just in the winter, but also in the summer. I think overall, it's going to increasingly become the case that LNG shipping is a highly leveraged option on the trading dynamics connected to the increased LNG supply.

The top right chart shows how TTF prices in Europe are dragging up LNG prices to levels that make it less attractive to the price sensitive markets. It also shows how the forward curve is flat and has very little money in it for traders. And the more normalized conditions, volatility in this curve results in ships having option value and being used more for storage. And the chart below bears this out. It shows how this last winter, it wasn't so much the case and vessels used for storage was 10 to 15 fewer than what we typically see at that time of the year.

This added to the market softness, and it's something that we'll monitor going forward. Now moving to Page 9, and this is where I comment on the dividend not being declared. And here's why. Well, it's fundamentally while rates languish below breakeven on open days. Our firm backlog of more than $1 billion across the fleet is reasonably well spaced, but this doesn't take away our exposure to vessels that come open over time.

Instead of predicting the timing of when markets normalize and risk getting it wrong, we've not declared a dividend. This increases our runway in the event of delays to more normalized markets and provides capacity for opportunistic growth. The chart on the right hand side includes our breakeven levels for reference. They, of course, reduce over time as debt is repaid and interest falls. We took this decision from a position of strength.

We have more than $1 billion in firm backlog. We have $288 million of liquidity at the end of 2024. We're reporting strong operating results, and we have no refinancings until mid-2029. From here, John will take the quarter in more detail.

John Boots: Thanks, Richard.

So I'll run you through the fourth quarter. Turning to Slide 10. In our earnings release earlier today, we reported TCE revenues of $80.8 million, exceeding the guidance provided during our third quarter earnings call. This also marks an increase from the prior quarter's $77.7 million in TCE revenues, primarily driven by a reduction in drydock days. Time and voyage charter revenues generated an average TCE rate of $73,900 per day across the fleet of 12 vessels in Q4.

This compares to $81,600 in Q3, mainly the result of the newbuild vessel entering our fleet in mid-October, which operated in the spot market and one vessel finishing her contract during the quarter and also operating in the spot market. Total operating revenues of $84.6 million surpassed both consensus estimates and Q3 levels. These figures include $3.1 million in non-cash amortization of net intangible contract assets and liabilities, along with around $700,000 in third-party vessel management fees. Adjusted EBITDA for Q4 reached $55.3 million, up from $53.7 million in Q3, reflecting the increase in operating revenues. To note, adjusted EBITDA does not take into account the $3.1 million in non-cash amortization that I mentioned previously.

Vessel operating expenses averaged $17,000 per day per vessel during the quarter, a decrease from Q3 and slightly lower than the full year average in '24. Moving to Slide 11, where we show the bridge from Q3 to Q4 for both operating income and net income. Q4's operating income was $38.5 million, sorry, slightly lower than the $38.9 million in the previous quarter. This was driven by higher TCE revenues, offset by higher OpEx due to the addition of the Kool Tiger newbuild and its positioning expenses. The operating margin remained strong at 46% of operating revenues.

Net income for the quarter was $29.4 million, up from $8.1 million in Q3. This increase was primarily due to a $23.5 million swing in net unrealized gains on mark-to-market interest rate swaps. Turning to Slide 12. As of December 31, our backlog exceeded $1.7 billion, including all extension options. This equates to approximately 61 years of backlog or an average of 4.7 years per vessel across the entire fleet of 13 vessels.

The average TCE rate of our firm backlog of approximately $1 billion is above $82,000 per day. The chart on the left illustrates our backlog distribution over the next two years, where near-term coverage of consensus revenues remains robust, approximately 86% in '25 and 65% in '26. Turning to Slide 13, where we show illustrative operating revenues. It highlights the potential upside for '25 and '26 revenues under different rate scenarios. Assuming an underlying rate of $20,000 per day for open TFDE days and an additional $20,000 per day premium for two stroke vessels, the revenue opportunity is significant.

If TFDE spot rates were to rise to $70,000 per day, the upside potential exceeds $60 million in '25 and $100 million in '26. To emphasize, these are not projections of rates for the respective years, but an exercise meant to show the company's performance in different hypothetical scenarios. Also note that the low end of $20,000 per day for open TFDE vessels, as Richard has mentioned as well, is an extremely depressed level in any historical context. While such increases do not materialize overnight, it does underscore the increased earnings potential under improved market conditions. Turning to Slide 14.

In today's market environment, we are pleased to maintain a robust balance sheet with strong liquidity, no debt maturities until mid-'29. Over the past year, we effectively restructured most of our debt through refinancings and also covenant harmonizations, reinforcing our financial flexibility. The unwavering support from our lending partners has been instrumental in this process, positioning us well for the future. As of December 31, cash and cash equivalents stood at approximately $165 million, up from $142 million in the previous quarter, largely due to the drawdowns under various financings. Adjusted EBITDA was mostly offset by debt service in the fourth quarter, but note that our debt service in each of the second quarter and the fourth quarter of each year includes semiannual debt repayments.

So these two quarters always show a higher debt service amount. In addition to the cash, we retained $123 million in undrawn capacity under the RRCF that we secured in December last year. And in addition to not have any debt maturities until '29, our average interest rate is well below 6% and 77% of our debt either hedged or fixed on a net debt basis. To recap the presentation on Slide 15. In summary, we had strong revenues and operating results, reflecting strong chartering performance.

The company delivered an adjusted EBITDA margin of 65% and an operating margin of 46%. Our fleet remains well positioned with the majority of open days secured under the $1.7 billion backlog. The balance sheet is in good shape and should allow for opportunistic growth. On the strategic front, our asset purchases in previous years show our disciplined asset management approach to drive value creation. Given the current depressed spot rates, which remain below economic breakeven and even operating costs, we maintain a prudent long-term focus.

Should rates improve meaningfully from these levels, free cash flow should become available to shareholders again. So with the financial overview concluded, Richard, I'm handing it over back to you for some closing comments.

Richard Tyrrell: Thanks, John. The one thing I'd like to just emphasize that is a significant upside once rates start to improve and normalize. And with that, Justin, please, can you open up the lines to questions.

Operator: Thank you. [Operator Instructions] And for our first question, this comes from the line of Frode Morkedal from Clarkson Securities. The line is open.

Richard Tyrrell: Hi, Frode.

Frode Morkedal: Hi, guys.

On the dividend, I'm first out there. I noted you mentioned, of course, it's taken from a position of strength and it's prudent to cut the dividend, which makes totally sense. But you also mentioned in the slide on Page 9 that you've considered the runway in the event of delays, right? So maybe you could talk about that consideration given what you have in terms of backlog and the balance sheet you have? How would you consider the runway?

Richard Tyrrell: Sure. Yeah. And obviously, the runway is something that we've felt the need for as rates have come down, and we felt the need for a longer runway and hence, the decision that we took.

And of course, what we typically do is look at where we have significant refinancing needs, which in our case, are way out in 2029. And we have a balance sheet which can basically accommodate whatever the market throws at us between now and then. Now our expectation is that things will get better way, way, way in advance of then. But if they don't, then we can accommodate it.

Frode Morkedal: About the CapEx you've had in terms of upgrades and stuff like that, how is that looking from now on?

Richard Tyrrell: It's looking very good for a couple of reasons.

And it's only something that's actually been incurred on one vessel so far, which is now back on the water. The other vessels are going in and out of the yard over the next few weeks and months. But on the vessel that we upgraded, we have been making upside in excess of $5,000 a day. And that means under the terms of its contract, the total upside has been over $10,000 a day, and we've been sharing that with the charterer. So there's real money in those upgrades.

And I think almost more importantly in this market, it makes the vessels that much more attractive to charters and it helps with the employment of the vessels. So either way, we're getting good value out of those upgrades.

Frode Morkedal: Okay. On the market, I noticed the layup slide you had on steam. But how would you consider the TFDE economical decision to either layup or idle a ship? What's the layup cost today if you wanted or somebody in the industry wanted to lay up a ship?

Richard Tyrrell: It depends whether it's a sort of cold stack or warm stacking, I guess, in drilling terms.

You save a bit of money if you've got a warm stack because you can reduce the number of crew on board and you obviously need less and less consumables. So there is something of a saving there. Does that answer the question or are you thinking about it slightly differently?

Frode Morkedal: No, I guess you haven't really considered doing that, I guess. It seems like people are trying to keep the ship cool, right, and then hoping for a turnaround. But at some point, I guess, people need to consider idling a ship for a while.

Richard Tyrrell: Yes. I think what you referred to there, is like the first step. The first step is at what point do people say we're not going to take heal and allow the ship to wall up. And we haven't reached that stage on any of our ships, but we know others that have. And the issue with that and what makes people very reluctant to do it is that to get a ship back online again costs about $0.5 million because you need to get it cold.

And you can do the math at these kind of rates, you need a jolly long contract in order to amortize that kind of expense. So we are seeing a lot of vessels which have gone warm, and that applies across almost all asset types. So that's kind of the first step. And the next step is actually laying up a property where you go to an anchorage and then you finally get to the step where things literally get mothballed and nothing other than the older steamships are in that kind of position.

Frode Morkedal: Okay.

That's cool. Great color. Final question I had is on scrapping. Why haven't we seen more scrapping on the old steamers yet?

Richard Tyrrell: I tend to look at idling more than scrapping because I just think there’s a backlog building. And whether they’re idling or scrapping, they are effectively out of the market for all intents and purposes.

Frode Morkedal: Thank you.

Richard Tyrrell: Thank you.

Operator: Thank you. Our next question comes from the line of Liam Burke from B. Riley.

Your line is open.

Liam Burke: Thank you. Hi, Richard. How are you today?

Richard Tyrrell: Fine. Thanks, Liam.

How are you doing?

Liam Burke: I’m doing fine. Thank you. I think it's, I mean, pretty much consensus that 2027, the supply of LNG carriers are going to be awfully tight. Some people are speculating there will even be a shortage. In your prepared comments, you said that charters, I mean, there's very little discussion on any kind of long-term charter.

Understanding that 1.5 years from now, possibly, there's going to be a tightness of supply. Why aren't there more discussions about this or charters trying to grab assets while they can?

Richard Tyrrell: Well, I mean, at the moment, the bid-ask spread is quite large. And I was talking a little bit about our runway. I mean I think the actual charters, they view themselves as having a bit of runway as well before they have to worry too much. So they are there and they've been sitting on their hands.

We're seeing a few signs they might be starting to, I don't know, want to rig on their hands free, but it's very early stages as of now. But I think fundamentally for these guys, a longer-term deal is going to be still in the high 80s. And it's very, very difficult to take up to your management a deal at that kind of level when they're looking at the press and they're seeing the spot market at levels that it is today.

Liam Burke: Okay. You also mentioned the current state of the spot market, which I mean, is pretty indescribable at this point, is creating opportunities for assets coming online.

Have you seen an attractive pipeline? And how would you manage balance attractive asset values with having to own this vessel through an unpredictable period of tough times?

Richard Tyrrell: Yes. And that's a balance you have to get right, obviously, if you want to go down that path. It's exactly the way you got to think about it and then the added sort of complicating factor in the LNG space is that they're in the liquid market for these assets. So it's not like dry bulk and tankers where the deal is happening day-in, day-out and you've got reference points. So we'll obviously we've got in our mind what prices make sense for what kind of vessels.

We'll have to see if we get into sort of a landing zone for a deal. But obviously, in this kind of market, it's quite possible that we do. And if we find the right kind of deal, it will be a nice opportunity to grow the business and create some more value.

Liam Burke: Great. Thank you, Richard.

Richard Tyrrell: Thank you, Liam.

Operator: Thankyou. [Operator Instructions] Our next question comes from the line of Climent Molins from Value Investor’s Edge. The line is open.

Climent Molins: Good afternoon.

Thank you for taking my questions. Most has already been covered, but I wanted to follow up on Frode's question on the dividend as well as on Liam's last question. You mentioned that part of the reasoning for cutting the dividend was also to set you up to potentially acquire some vessels on the road. And could you give us some more commentary about how you currently view the trade-off between potential growth, let's say, and repurchases?

Richard Tyrrell: It's a good question. And there's sort of three things that you've got to consider.

You've got the growth, and then you've got distribution via repurchases and then distribution by a dividend. We have very much left the repurchase program in place. So we do believe that there's value to be created there. And of course, that is something that you can move on quite quickly when the time is right. And ultimately, I think it's what any sort of growth opportunity has got to be measured against.

Climent Molins: Make sense. Thanks for the color. You also mentioned that vessels used for storage this year have been kind of lower than in previous years. And I was wondering, on top of the lower volatility in the TTF, have you seen any other large drivers for that trend?

Richard Tyrrell: No. But I think it is very much a – well, I mean, it is a very flat curve that's driving that trend.

Now why have we got a flat curve? Well, there's a few reasons. I think we've gone from a market which was very much focused on the winter season. Now you have a bit more of a winter season and the summer season. That's because of the air conditioning demand in the more emerging LNGe markets. which in itself doesn't make the sort of contango go away because you still got the shoulder periods in between.

But I think what has created some of the issue this year is that it's the refilling of storage in Europe. And that has sort of elevated the price of the LNGe in periods where maybe you wouldn't normally have expected it to be quite so high, which, of course, has taken away that contango that the traders to trade around.

Climent Molins: Yeah. That makes sense. I’ll turn it over.

Thank you for taking my questions.

Richard Tyrrell: Thank you very much, Climent.

Operator: Thank you. And your next question comes from the line of Nils Thompson (ph) from [indiscernible] Securities. Your line is open.

Unidentified Participant: Good afternoon, guys. Hi, there. Just quickly on Kool Tiger, and I guess it ties a bit into the other questions. But is it the most likely outcome that you're going to enter some sort of an index deal and then at a fixed rate at a later stage this decade or are you looking at other sort of setups? And if it's index with fixed, at what point do you think that charters are willing to commit on fixed charter rates, Thomas, is it '27? Is it 28? Where do you see sort of the demand for that?

Richard Tyrrell: Yeah. I think that having a floating type deal is a good way to bridge any valuation disconnects between the owners and the charts.

So we could well go down that route. We do think there's quite a lot of demand for '27 and certainly 2028 for longer-term business. But that's the kind of business where charters are still sitting on their hands, they don't feel they need to lock that in quite yet. But of course, a vessel is eligible for that business, and maybe something which combines that kind of deal with something floating in the short term is something that I could definitely foresee. And then you've got this other category of charters who actually do have nearer term demand, but of course, they're wanting to use their bargaining power at the moment to try and get a very, very good deal.

So our job is to try and flesh them out a little bit and maybe call that bluff. But when you've got a market of owners looking to compete for business like that, it takes real discipline on the part of the market to actually win those businesses at a decent rate.

Unidentified Participant: Yeah. That’s good color. Thanks.

Richard Tyrrell: Thanks, Nils.

Operator: Thank you. And seeing as there are no more questions in the queue, that concludes our question-and-answer session. I will now turn the call back over to our CEO, Rich Tyrrell, for closing remarks.

Richard Tyrrell: Thank you, Justin, and thank you for everybody who dialed into the call and for those who asked some excellent questions.

For those who will be in Norway next week, I’ll be at the DNB conference to see you there. And then for those who are attending the Capital Link at the end of March in New York, I’ll be there also. So hopefully, we’ll see a few people at those events. And if not, catch you next time. Thank you.

Operator: The meeting has now concluded. Thank you all for joining. You may now disconnect.