Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Three and six months ended June 30, 2022
Filing Date: September 23, 2022
Business Overview: The Partnership owns and operates a fleet of six LNG carriers employed on long-term time charters. As of September 22, 2022, the fleet maintained 100% utilization for the ninth consecutive quarter.
Key Financial Metrics
| Metric (in thousands, except per unit) | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2022 |
|---|---|---|
| Voyage Revenues | $33,419 | $66,679 |
| Net Income | $11,117 | $34,999 |
| Adjusted Net Income | $9,062 | $19,101 |
| Adjusted EBITDA | $22,940 | $77,558 |
| Earnings Per Common Unit (Basic/Diluted) | $0.22 | $0.79 |
| Adjusted Earnings Per Common Unit | $0.17 | $0.36 |
| Net Cash from Operating Activities | $8,184 | $33,032 |
| Total Cash and Restricted Cash | $100,233 (as of June 30, 2022) | |
| Outstanding Indebtedness |
Debt & Liquidity: As of June 30, 2022, outstanding indebtedness under the $675.0 million credit facility was $543.0 million. The Partnership held $100.2 million in total cash (including $50.0 million restricted) and had $30.0 million of unused availability under a revolving credit facility with its Sponsor.
Material Changes vs. Prior Period
- Net Income: Increased 22.0% to $11.1 million for the three months ended June 30, 2022, compared to $9.1 million in the prior year period. This increase was primarily driven by a gain on interest rate swap transactions, partially offset by higher dry-docking costs.
- Adjusted Net Income: Decreased 12.5% to $9.1 million for the quarter, compared to $10.4 million in the prior year. The decline was attributed to lower vessel revenue and increased interest and finance costs.
- Voyage Revenues: Decreased 1.5% to $33.4 million for the quarter due to reduced revenue-earning days caused by scheduled dry-docks of the Clean Energy and Amur River.
- Operating Expenses: Vessel operating expenses decreased to $7.4 million (daily rate of $13,588) compared to $7.6 million in the prior year, driven by lower planned technical maintenance and crewing costs.
- Interest Costs: Net interest and finance costs increased 11.1% to $6.0 million due to a higher weighted average interest rate, despite a reduction in interest-bearing debt.
Outlook, Risks, and Management Commentary
Management Commentary: Management highlighted 100% fleet utilization and a strong revenue backlog of $0.95 billion with an average remaining contract term of 6.4 years. The strategy remains focused on using cash flow to deleverage the balance sheet and reinforce liquidity. Three vessels (Clean Energy, Amur River, and OB River) completed scheduled dry-docks and ballast water treatment equipment installations.
Risks and Contingencies:
- Sanctions and Geopolitics: The Partnership monitors sanctions related to the conflict in Ukraine. While current U.S. and E.U. regimes do not materially affect operations, the charters for three vessels are effectively under the control of the German government due to the placement of Gazprom Germania under fiduciary control. The Partnership cannot assure that future sanctions or escalation will not impact its business.
- Forward-Looking Statements: Risks include fluctuations in charter rates, bunker prices, vessel values, regulatory changes, and the potential discontinuance of LIBOR after June 30, 2023.
Investor Verification Checklist
- Verify the impact of the German government's fiduciary control over Gazprom Germania on the charters of the Amur River, OB River, and Clean Energy.
- Confirm the reconciliation of Non-GAAP measures (Adjusted Net Income, Adjusted EBITDA) to GAAP measures in Appendix B of the full press release.
- Monitor the status of the $0.14 billion portion of the revenue backlog related to Yamal contracts, which is subject to yearly adjustments based on actual operating costs.
- Review the schedule for the remaining dry-docking and special survey requirements for the fleet to assess potential future off-hire periods.
- Assess the Partnership's ability to refinance debt referencing LIBOR prior to the June 30, 2023 discontinuance deadline.