Cool Company Limited (CLCO) has concluded its Q4 2023 earnings call on February 28, 2024, with a mix of record performance indicators and cautious market outlooks. The company reported a record time charter equivalent of $87,300 per day, driving an increase in revenue, EBITDA, and net income for the quarter.
Despite the robust financial results, including a dividend payout of $0.41 per share, Cool Company acknowledged challenges such as falling gas prices due to a warm winter and charterers subletting excess capacity, which have dampened rates and market sentiment.
Nevertheless, the company remains optimistic about the demand for LNG shipping and anticipates a market improvement in the latter half of the year.
Key Takeaways
- Cool Company achieved a record time charter equivalent rate of $87,300 per day in Q4 2023.
- Dividend announced at $0.41 per share, reflecting a 64% payout of net income.
- Warm winter caused a decline in gas prices and an excess of shipping capacity.
- Company anticipates rate recovery with increased shipping demand and longer distances.
- Financial performance shows strong Q4 with operating income of $55.1 million and net income of $22.4 million.
- The company distributed dividends slightly higher than the free cash flow for the full year.
- No debt maturities until February 2027; backlog for 2024 is 95% committed.
- Four drydockings planned for 2024; Cool Husky vessel to undergo emission-reducing upgrades.
- Disruptions in Panama and Suez Canals have increased demand for carrier assets.
Company Outlook
- Expectation of improved market conditions in the second half of the year.
- Confidence in demand for LNG shipping bolstered by new supply projects and increased East markets demand.
Bearish Highlights
- Current softer market has led to a decrease in inquiries from traditional customers.
- Uncertainty in the timing of when charters will secure shipping.
Bullish Highlights
- Increased demand for carrier assets due to canal disruptions.
- Good visibility on future demand for LNG ships.
Misses
- The company's dividend distribution slightly exceeded the available free cash flow.
Q&A Highlights
- The company is targeting long-term charters of 5 to 15 years for vessel transportation.
- Newbuild ship prices are high, necessitating a day rate above $100,000 to ensure a positive return.
- Financing considerations and market standoffs discussed regarding newbuild prices and facility expansions.
Cool Company Limited's Q4 earnings call showcased a company navigating a complex market environment with strategic optimism. The record financial metrics underscore the company's ability to capitalize on its assets, even as it faces external pressures from the global energy market.
The focus on long-term charters and the acknowledgment of current market standoffs reflect a cautious but proactive approach to future growth and stability. With no immediate debt concerns and a nearly fully committed backlog for the coming year, Cool Company appears to be on a steady course, with eyes keenly set on emerging opportunities and potential market shifts.
InvestingPro Insights
In light of Cool Company Limited's recent Q4 2023 earnings call, real-time data from InvestingPro provides a deeper financial perspective on the company's performance. With a market capitalization of $610.03 million and an attractive P/E ratio of 3.33, Cool Company stands out in its sector.
The company's impressive revenue growth of 154.35% over the last twelve months as of Q3 2023 is a testament to its robust financial health and operational efficiency.
InvestingPro Tips highlight two key aspects of Cool Company's financials. Firstly, analysts have revised their earnings upwards for the upcoming period, indicating a positive outlook on the company's future performance.
Secondly, Cool Company's gross profit margins are noteworthy, standing at 78.45% over the last twelve months as of Q3 2023. This high margin reflects the company's ability to manage costs effectively while maximizing profit from its revenues.
Still, it is important to note that Cool Company does not pay a dividend to shareholders, as indicated by the reported dividend payout in the article. This aligns with the InvestingPro Tip that the company's short-term obligations exceed its liquid assets, which could explain the strategic decision to retain earnings rather than distribute them.
For readers looking to delve deeper into Cool Company's financials and future prospects, InvestingPro offers additional insights and tips. There are 5 more InvestingPro Tips available that could help investors make informed decisions, including analysis on the company's stock price movements relative to the market and its debt levels. To access these tips and more, visit https://www.investing.com/pro/CLCO and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Cool Company Ltd (CLCO) Q4 2023:
Operator: Good morning ladies and gentlemen and welcome to the Cool Company Limited Q4 2023 Business Update Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, February 28, 2024. I would now like to turn the conference over to Richard Tyrrell. Please go ahead.
Richard Tyrrell: Thank you, Eric and good day everybody. Thank you for joining the CoolCo fourth quarter 2023 results call. Let's get started by turning through the first couple of pages and taking a look at Page 3, to company at a glance for the quarter. On the left, we have the headlines. Our time charter equivalent increased to $87,300 per day, a record level, that was driven by our contracted revenues and seasonal tailwinds. This fed into higher revenue, higher EBITDA and higher net income if you adjust for the mark-to-market losses on interest rate swaps. The natural consumption of backlog over the quarter as a result of the passage of time was offset by the announcement of a 12-month charter for one of our open vessels after the end of the quarter. As a result of our strong operational performance, the Board announced a dividend of $0.41 per share for the fourth quarter of 2023. This equates to a dividend yield of 14% at the current share price. The shares have been under pressure since the end of the quarter because some of the factors you see on the right-hand side of the page. We'll get into these as we go through the presentation, but in summary, the warm winter has resulted in falling gas prices and charter is seeking to sublet any excess capacity in their fleets. These sublets have weighed on rates and resulted in negative sentiment, but we do see them clearing the market and our shipping demand increases with longer shipping distances as we move through the year, we expect rates to bounce back. Shipping businesses have started to increase because of the distributions in the Panama Canal and the Red Sea. Current LNG prices are expected to spur demand in the more distant markets that are even further away than normal because of these disruptions and this is positive for our modern ships. It's not so great for small and less efficient steam turbine vessels and it's hard to envisage how they stay in the market. This last point, along with the new LNG supply that is now visibly coming is expected to balance the shipping market. Turning to Page 4. As you would expect, we have seen an increase in the rates in the fourth quarter, driven by one vessel trading in the spot market at an opportune time and another vessel on a variable rate contract. A favorable ballast bonus also played a part in the results. In addition to this, I am pleased to announce that the increase in revenue has more than flowed into EBITDA because of a solid cost performance. We've had some movements in the fleet between this quarter and the comparison quarter in 2022 with the arrival of the ING vessels in the fourth quarter of 2022 and the disposal of the seal in the first quarter of 2023. But nonetheless, the results stand out as the highest since CoolCo's formation. John will get into the numbers in more detail shortly. But before he does, I wanted to say a few words about the market and our expectations going forward. Please turn to Page 5, where you will see the story of the past three years. 2021 was a cold winter in Asia, and you can just see the LNG prices coming off their peak on the left-hand side of the chart. Wind the clock forward and the market rose in anticipation of another cold winter in 2022. And while this didn't really materialize, it shows the tendency of the markets to anticipate based on most recent history. By January 2022, gas prices were falling, only to be disrupted by the Ukrainian shock. This worsened during the summer as Europe's scrambled to fill storage, culminating with the sabotage of the Nord Stream gas pipeline, but at the time, still provides a material amount of supply. The peak LNG price showed on this chart is almost 10 times the low price. To put this into perspective, cargo values have ranged from $30 million to $300 million over this period. A factor that, at its highs, convinced charter us to maintain additional length in their shipping fleets. Gas prices dropped heading into the autumn of 2022 and the winter of 2023, but still remained elevated, something that's prompted price-sensitive markets to focus on coal for the next season. This year -- or last year, now 2023 has seen much less volatility in prices and our expectation is that this will result in increases in LNG shipments to far away markets, those markets being predominantly in the East. Such markets will consume their stockpiles of coal this year and are looking forward to using more environmentally-friendly gas in the future. Turning to Page 6 and of course, there has been a recent lack of volatility in the gas markets, and that has created a negative sentiment towards shipping. But even in this market, we were very pleased to announce the charter of the Husky earlier this month. Husky is on a 12-month charter, during which time it will be upgraded to LNGe specs during a drydock that you can see from the chart. The level of this charter is decent and it has a nice feature in that we will share the upsize from the upgrades with the charterer. Conservatively, these are anticipated to be worth a few thousand dollars a day above and beyond what is shown on the chart. While Husky is coming off a very healthy Ukraine-driven contract at a lucrative period in the spot market and the contract it is moving on to is at a lower level, the decrease is offset by the Calvin that is about to start its three-year time charter at higher levels than those of which it was previously chartered as can be seen in the line that is dashed in turquoise on the right-hand side. The next point I'd like to make on these slides is that we expect the market to be improving by the time our next available vessels come available for re-charter. We spent quite some efforts making sure that these vessels don't come available at this time of year when rates can be low, and we believe that rates will be significantly better by the time they become available and are re-chartered in the second half of this year. The spot chart on the left shows how this is typically the case for our TFDE vessels and we'll provide further support for this case when we go through the next pages. The chart on the right shows how spot rates and the knowledge that a considerable number of new vessels are delivering over the coming years has depressed the term business in a way that was not seen last year. Liquidity for long-term charters has been hit by the charter as being able to bridge needs with sublets and defer decisions, but there remain enough requirements for me to be confident of fixing our newbuildings before delivery. I don't have an announcement for you today, but it will most certainly be enough to be material enough to warrant its own announcement outside the normal results schedule when it happens. Turning to Page 7 and here we show how the new supply of LNG will soak up much of the forthcoming shipping. The chart on the left reflects CoolCo's view on forthcoming projects. It totals more than 110 million tonnes per annum of LNG between now and the end of 2026, with shipping needs of approximately two to three vessels per MTPA, depending on how much LNG goes to Asia versus the Atlantic. I won't get into the ins and outs of specific projects, but in general, it's fair to say that the projects are led by large and established LNG players, and these are on schedule with Novatek's Atlantic LNG 2 being the only wild card. What it is important to appreciate is that most of these incremental volumes will have to go east given the peak demand in Europe is already behind us. This is very good news for shipping and we're not concerned about demand. Lower gas prices are a major facilitator and the key markets are really gearing up to take the product. The table on the right shows some key steps that have been taken in China, India and Vietnam, Thailand, the Philippines, and Bangladesh. These changes are providing the industry with confidence around the levels of demand, and this is something that's supported by anecdotal evidence from our business development activities. The other part of the equation of the newbuilds and possible retirements and Page 8 provides an update on this picture. You can see a fairly straight line of deliveries over the same period as we plus it on the previous page. And whereas the deliveries are potentially on a more steady trajectory compared to an S-curve in supply, the overall picture is reasonably well-balanced. Importantly, most of the vessels are fixed known volumes and CoolCo vessels are the first to deliver amongst those still to be fixed. As expressed before, we remain confident of fixing these vessels before delivery. On the other side of the coin, we're expecting many more retirements in the coming years compared to what we've seen previously. A number of all steam turbine vessels received a new lease of life as a result of the high rates seen after the Russian invasion of the Ukraine. However, this is not a trend that we see continuing, given the high cost of keeping these vessels on the water in the face of lower rates. Is it worth spending up to $10 million on a drydock for an off-contract vessel when spot rates for steam turbines, so as low as $25,000 per day? We don't see how anyone can make that work. These vessels are typically smaller than newbuilds, but even if they're not replaced on quite a one-for-one basis, their retirements still amount to a significant addition -- additional demand for more modern tonnage. So, that concludes my market overview, and I'd now like to pass it on to John, who will take you through the quarter in more detail.
John Boots: Thank you, Richard. I will provide a financial overview for the fourth quarter and the full year of 2023. So, I'm turning to Slide 9. In our Q4 earnings release today, we announced a solid fourth quarter with some metrics reaching record levels in the history of CoolCo. Time and voyage charter revenues for the quarter were $89.3 million, resulting in an average time charter equivalent rate of $87,300 per day across our fleet of 11 vessels, also a record. The improvement versus the last quarter is primarily attributed to higher floating and spot rates during the winter season on two of our vessels. Fourth quarter total operating revenues generated $97.1 million, which is inclusive of non-cash amortization of net intangible liabilities of $4.5 million and $2.3 million from third-party vessel management revenues. This number is above the guidance range provided during our third quarter earnings presentation in late November. This is mainly because of one vessel operating in the spot market that finished off the quarter -- the fourth quarter on a favorable spot rate that was not committed at the time of providing the guidance. Full year time and voyage charter revenues were $347 million and full year total operating revenues were $379 million. Operating income for the quarter reached a healthy $55.1 million, an improvement of 14% compared to the third quarter of 2023. The fourth quarter operating margin relative to the fourth quarter revenues was very strong and reached a level of 57% margin. We're also very pleased to report that our vessel operating expenses for the quarter came in at $16,600 per day per vessel, which was roughly $2,000 per day per vessel better than the two previous quarters, mainly due to the timing of main engine overhauls and lower purchasing activities on acquired vessels. Operating income also included $18.9 million in depreciation and amortization, along with $5.4 million in administrative expenses, which includes a combination of third-party fleet management expenses and routine corporate overhead. Adjusted EBITDA for the third quarter of 2023 was $69.4 million compared to $62.8 million for the third quarter of 2023, also a healthy improvement. Moving on to the next slide, the net income bridge. The net income chart on the left illustrates the transition from Q3 to Q4. Reported net income for the fourth quarter was $22.4 million compared to $39.2 million in the third quarter, primarily reflecting a $23 million unrealized mark-to-market valuation swing on our interest rate swaps. This was partially offset by roughly $4 million in higher revenues and the aforementioned OpEx savings. The mark-to-market swing was the result of a significant market interest rate to drop from the end of Q3 to the end of Q4. The fourth quarter net income in the chart on the right adjusts for recurring non-cash elements and equaled $34.2 million, a record quarter for the company, if one excludes the non-recurring gain on the sale of the Seal vessel during the first quarter of last year. The non-cash amortization of net intangible assets and liabilities is associated with the revaluation of charter agreements related to the spin-off from Golar and the subsequent acquisitions in late 2022. Excluding such non-cash items, the approved dividend of $0.41 per share represents approximately a 64% payout of fourth quarter net income. Turning to Slide 11, the cash flow bridge for the full year. This chart shows the starting and ending cash and the cash movements during the entire year. Excluding newbuild CapEx, related borrowings, and sale proceeds from the Seal, the free cash flow to equity in the circled area was around $84 million. We declared a cumulative $88 million in dividends for 2023. So, we effectively distributed slightly higher in dividends than the free cash flow available to equity holders. Also for the full year, we paid $114 million for the exercise of the newbuild option and $67 million in subsequent milestone payments to the shipyard, totaling $181 million. We also spent $16 million in advanced payments for the previously announced LNGe upgrades. In addition, we upsized the $570 million facility by $70 million back in June of last year. And during the fourth quarter, we borrowed $40 million under our newbuild sale and leaseback predelivery finance facility, which together with the upsize adds up to $110 million in new borrowings during the year. Turning to Slide 12. We are reiterating our dividend policy that we announced back in October 2022. On a quarterly basis, our free cash flow to equity shows a bit of variability due to the semiannual debt repayments on one of our facilities. However, on a cumulative basis, since the inception of our dividend policy, you will see that we paid out slightly higher than our free cash flow to equity. The basis for calculating free cash flow to equity is adjusted EBITDA minus regular debt service plus interest income. The Board has approved a dividend payout of $0.41 per share with an ex-dividend date that is set for March 8th and a record date of March 11. The dividend will be distributed to DTC registered shareholders on or around March 18, followed by Norwegian registered shareholders approximately three days later on or around March 21st. Turning to Slide 13 on the financing. In this morning's press release, we were very pleased to announce that we have received commitments from several quality commercial banks to refinance our sale and leaseback facility maturing in the first quarter of 2025 by upsizing the existing $520 million bank facility. Because this existing sale and leaseback debt has a very low interest rate, we structured the refinancing with a delayed drawdown to ensure that we maintain the benefit of this low interest rate through the interim period. Alongside this upsize, the banks have also committed to make some changes to the financial covenants, the main one being a relaxation of the cash covenant, which will become 4% of total debt. As you can see on the chart, once the upsize is closed, which we expect in March, we have no debt maturities for the next three years. Turning to Slide 14. On this slide, we show the split between commercial and current sale and leaseback debt. We have fixed our interest rate for about 85% of our net debt with an average interest rate well below 6%, even on a pro forma basis, which includes the newbuild debt. Table at the bottom shows the split between realized and unrealized mark-to-market gains and losses, which on our income statement are combined in one line item. Our cumulative realized swap results since inception of our swap program in July 2022, we're well in the money with $11 million in net gains. So, our hedging program has paid off well so far. The unrealized gains as of the end of the year were approximately $5 million. For those modeling CoolCo quarter-to-quarter, please take note of this significant and largely unrealized mark-to-market swing in our quarterly earnings reporting. So, in summary on this financing slide, no debt maturities until February 27, we're freeing up between $50 million and $100 million in cash as part of the upsize and the amendments, and an interest rate that is substantially fixed and well below 6%. Moving on to the next slide with an overview of the backlog. This slide highlights the revenues for 2024 are committed for approximately 95% with one open vessel in late July and another one late November. While this open day percentage will obviously increase over time, the time charter equivalent rate from our backlog is approximately $76,000 per day per vessel. And on average, we maintain roughly 4.6 years of backlog per operating vessel, including actions. This includes the options exercised to the maximum extent. Of particular significance on the chart to the right is the cash flow generated by our backlog, calculated as contracted revenue backlog minus direct operating expenses, which surpasses our net debt. This underscores a robust level of coverage even before accounting for any future chartering activity related to our open days. Turning to Slide 16, first half year guidance. On this slide, we reiterate our February 7 selected revenue guidance for the first half of this year. In 2024, we anticipate four drydockings, one in the second quarter and three in the third quarter. Currently, we expect these drydockings to begin and end within the relevant quarter, but the exact dates may change depending on the timing of cargo deliveries and our client needs. These drydockings will result in some unpaid drydocking time. As Richard mentioned, the Cool Husky will undergo upgrades with a sub cooler and an air lubrication system to enhance performance and reduce emissions. With the financial overview concluded, I'm handing the call back to Richard.
Richard Tyrrell: Thanks John. I think it's time to open up the line to line for questions. So, Eric, if you could please do that for us?
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Frode Morkedal with Clarksons Securities. Please go ahead.
Frode Morkedal: Hi guys. Thank you. On this one chart that you announced in February, which I assume is Husky you showed on this chart, it was a bit hard to read on the line there. But I guess also based on the revenue guidance for Q2 you provided, I guess, you are able to back out that the charter rate needs to be above $80,000 per day. Are you able to confirm this?
Richard Tyrrell: Yes. The chart is accurate, Frode and your math is also accurate. Thanks for that question. It's an important clarification because I think a few people have had it at a somewhat lower level.
Frode Morkedal: Yes. It's a really strong charter rate, obviously. And I guess, is this charter rate inclusive of the, let's say, the benefit of the real liquefaction CapEx later this year?
Richard Tyrrell: No, that's in addition.
Frode Morkedal: Okay. Interesting. I guess more broadly, can you discuss how you are able to share the CapEx with the customer through a higher rate for these LNGe investments?
Richard Tyrrell: It's not so much sharing the CapEx. The CapEx is on us. It's more a question of how we get paid and in this particular contract, it made sense to share the upside. It will be the first vessel that's had these upgrades. So, yes, there's an inevitable uncertainty around certain elements of the performance. And the agreement we've come to with Santos is that we share the improvements. And I think that's a very fair agreement, and it also very much aligns us with charter. So, we, obviously, want to improve our performance as far as possible and that's for their benefit, and it's also for our benefit because of this mechanism.
Frode Morkedal: Perfect. That's great. Thank you.
Richard Tyrrell: Thanks for the call Frode.
Operator: Your next question comes from the line of Liam Burke with B. Riley. Please go ahead.
Liam Burke: Thank you. Hi Richard, hi John. How are you today?
Richard Tyrrell: Good. Thanks, Liam. How are you?
Liam Burke: I'm fine. Thank you. Could we go in a little detail about your two newbuilds? You're talking to several charterers and they're looking at unmet, I guess, right out of your press release, unmet transportation requirements. Would that translate into longer time charters? Or would they be spot market type agreements?
Richard Tyrrell: These vessels are going to be more targeted at the long-term market. Now, we're relatively agnostic on whether the long-term means five years or whether it means 15 years. I think there's a sort of a rate sensitivity as you go from one end of that scale to the other. But we are very much focused on those kinds of opportunities. Now, within the customer universe for those vessels, we've found that the traditional customers who will charter vessels through the cycle. They are still there and they have RFP processes, which are quite structured. And obviously, we participate in those. I think the fact that the market has been a bit softer more broadly has put off some people who have a stated need from doing anything immediately. And some of the more traders or big portfolio players might fall into that camp. So, overall, the level of inquiry is down somewhat because of that, but it is still there. And we are still seeing these inquiries from people who will charter through the cycle, and they basically view it as winning some and losing some.
Liam Burke: Fair enough. And with the disruption in both the Panama and Suez Canal, are you seeing charterers more anxious to grab on to carrier assets? Or is this just a function of short-term supply/demand?
Richard Tyrrell: Very much so. We haven't seen a sort of immediate step change because at least so far, in general, the Atlantic volumes have stayed in the Atlantic and the Pacific volumes have stayed in the Pacific. But what we are seeing for next year or for this coming year, people are looking at their cargoes. They're looking at their schedules. And they're saying, well, wait a minute, if we have to go around the Cape of Good Hope, we're going to need an extra ship. So, there are people who are really starting to pay attention to this issue now and it will be positive for demand going forward.
Liam Burke: Great. Thank you, Richard.
Liam Burke: Thanks for the question, Liam.
Operator: [Operator Instructions] Your next question comes from the line of Mike Webber with Webber Research. Please go ahead.
Mike Webber: Hey good morning guys. How are you?
Richard Tyrrell: Very well. Thanks, Mike. And you?
John Boots: Hi Mike.
Mike Webber: Good, good, I guess. So, Richard, just a couple here. I wanted to follow-up on first question on the Husky. And based on your answer, I think I know what the implication is. But you touched on the relics [ph] and then kind of the alignment between the yourselves, the charterer, but with regards to the ALS system that you guys are upgrading or introducing to that later on this year for a trial, how do the economics work associated with that and your charterer in terms of potential fuel savings?
Richard Tyrrell: Yes, the way to think about it is that we have a level of a performance switch, which goes sort of across the speed range. So, if you're going below natural boil-off speed or basically just stationary, then you're going to get a lot of utility out of the relic [ph]. If you're going faster than the natural boil-off speed, you're going to be getting your value, somewhat less value, but still a few percentage points out of the ALS. So, what we're doing is that we're benchmarking the performance of the vessel before the drydock and then we're benchmarking -- or we're then comparing that to the performance of the actual performance of the vessel at of the drydock and calculating the benefit and sharing it between us.
Mike Webber: Got you. So, they're effectively tethered together. Okay, that's helpful. Just a follow-up on the Red Sea. If I think about the dynamics in place now where you've got obviously -- well, I guess maybe first and foremost, right, in terms of the rerouting, we're starting to see now around the Cape of Good Hope. Do you think we've seen the majority of that impact yet in terms of longer ton miles? Or do you think that's still ahead of us?
Richard Tyrrell: I think it's still ahead of us. And as I mentioned, I think so far, in general, LNG has stayed within its basin. So, a lot of the LNG out of the U.S. has been targeted at the Atlantic Basin coming into Europe and within the Pacific Basin, you probably Australian volumes going up to Asia going up to Japan and Korea, China and those markets. Qatari volumes, obviously, there's a bit of a sort of split. Some of them go east and some of them go west. But we haven't seen a lot of LNG switching patients. And the interesting thing about the volumes that are coming, they're going to have to go east because Europe is kind of kind of full. And a lot of these volumes are coming out of the Gulf. And the primary destination will be the East. And unfortunately, right now, the -- if there's -- it's difficult to get to because of these channel issues.
Mike Webber: Yes. And if I think about QP's volumes there, obviously, they're expanding with their NAV push, which actually looks on time, if not early as opposed to most of the stuff in the U.S. and they're actively marketing some of those volumes as well some of their legacy volumes. Are you starting to see, at least in conversations with potential charters, any kind of mix shift in terms of who you're talking to there? And I guess, the thought process is shifting towards more of an FOB focus there in terms of people setting up their transportation capacity for longer-term volumes that might be coming online in one to two years from now or two to three years from now?
Richard Tyrrell: Yes. Yes. I mean, we are -- I think this is the reason why we have quite good visibility on the needs going forward. What we have less control over is sort of the timing of when people feel the need to pull the trigger. So, we do have a strong sense of how many ships are going to be needed over time. And that's what gives us the confidence in the newbuilds. I mean, of course, if you're a kind of charter who's got a little bit more of a kind of trading mentality right now, you look at the market and you think, well, maybe I can wait and take us up that for a little while. If you are a charterers got a much more, I guess, more conservative approach and you're seeking to match your volumes with your shipping with your volumes than you do what you've always done, which is a RFP-type process and secure your shipping.
Mike Webber: Yes. Okay. That makes sense. One more for me and I'll turn it over. We saw newbuild prices inched down in January for the first time in a while. We're still up more than 20%, I think, over the last three years. Just curious on a relative basis, how do you think about returns on newbuild programs here versus, say, where we were a year ago and how attractive or an attractive you might find them?
Richard Tyrrell: Yes. I mean I think the -- well, the newbuild cost right now, let's start with that because that's pretty well established. And we've seen a number of sites to 270 recently. But I think in reality, with discounts, it's probably more like $260 million maybe even slightly below that. But the prices are elevated and today's cost of financing in order to turn a buck on your equity, you need to have a certain rate. So, that's a positive thing for us because it kind of bankers things at a decent level. I think that rate is above $100,000 a day. Do I think you're necessarily going to get that if you go out into the market tomorrow? I mean no, not quite. So, there's, I think, a potential for a bit of a standoff while the bid offer spread comes together.
Mike Webber: Okay. That makes sense. And on , I've got one more on your balance sheet. But on -- with regards to your -- the facility that you've got maturing in 2017, my presumption would be that, that was probably the first place you looked in terms of upsizing and the collateral pool might not have been -- might have been more fully baked into the advanced rate on that facility. Is there room to expand that in a similar way that you did the 2029 facility? Or is that more or less tapped?
Richard Tyrrell: Yes, I know, John, you got a table. So, let me pass this on to John.
John Boots: I mean we did consider that one as well, but it has a much shorter maturity than the May 29 one and that's the main reason, we upsized the May 29 facility. But is there room in the February 27? Yes, as long as we have collateral to it, things I'm sure we are willing to lend. But what's the point, right? It's only three years. So, we'd rather term it out a bit longer.
Mike Webber: Yes. Thanks.
John Boots: That answers your question.
Mike Webber: Yes. Yes. Okay. No, it just seems like you got more complicated conversation because you need an extension on it. Okay, that's all I've got. I appreciate the time, guys. Thank you.
Richard Tyrrell: Thanks for the question Mike.
Operator: I would now like to turn the call back over to Richard Tyrrell for closing remarks. Please go ahead.
Richard Tyrrell: I think without any further ado, I'll just thank everybody for joining the call and look forward to reporting back with the developments as they come in. Many thanks, Eric.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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