Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three and six months ended June 30, 2021
Filing Date: September 8, 2021
Business Overview: The Partnership owns and operates a fleet of six liquefied natural gas (LNG) carriers employed on multi-year time charters. As of September 7, 2021, the fleet maintained 100% utilization with an estimated contracted revenue backlog of approximately $1.09 billion and an average remaining contract term of 7.4 years.
Key Financial Metrics
| Metric (in thousands, except per unit) | 3 Months Ended June 30, 2021 |
3 Months Ended June 30, 2020 |
6 Months Ended June 30, 2021 |
6 Months Ended June 30, 2020 |
|---|---|---|---|---|
| Voyage Revenues | $33,929 | $33,913 | $67,377 | $68,384 |
| Net Income | $9,115 | $6,427 | $24,980 | $13,394 |
| Adjusted Net Income | $10,375 | $9,885 | $20,939 | $16,958 |
| Adjusted EBITDA | $23,635 | $24,131 | $47,495 | $47,870 |
| Earnings per Common Unit | $0.17 | $0.10 | $0.53 | $0.21 |
| Adjusted EPS (Common) | $0.20 | $0.20 | $0.42 | $0.31 |
| Net Cash from Operating Activities | $15,826 | $8,102 | $38,768 | $26,836 |
| Total Cash & Restricted Cash | $86,781 (as of June 30, 2021) | |||
| Outstanding Indebtedness | $591.0 million (as of June 30, 2021) |
Material Changes vs. Prior Period
- Net Income Growth: Net income for the three months ended June 30, 2021, increased by 42.2% ($2.7 million) compared to the prior year period. This was primarily driven by a decrease in finance costs and a reduction in losses on interest rate swap transactions, partially offset by higher operating and general administrative expenses.
- Revenue Stability: Voyage revenues remained flat at approximately $33.9 million for the three-month period compared to 2020. Average daily hire gross of commissions increased slightly to $62,440 per vessel per day from $62,200 in 2020.
- Operating Expenses: Vessel operating expenses rose to $7.6 million (daily average of $13,945) from $6.9 million in the prior year, attributed to higher crewing and supply costs due to the COVID-19 pandemic.
- Cash Flow: Net cash from operating activities increased by 95.1% to $15.8 million for the quarter, reflecting improved operational cash generation.
Outlook, Management Commentary, and Risks
- Management Strategy: Management intends to use cash flow generation to deleverage the balance sheet and reinforce liquidity to build equity value. The fleet is fully utilized with long-term charters; the earliest contracted re-delivery date is Q3 2023.
- Recent Developments: The Partnership entered into a new time charter for the vessel Arctic Aurora with Equinor ASA, ensuring no lapse in employment. Additionally, $2.15 million of common units were sold under the ATM program, leaving $26.5 million in remaining availability.
- Distributions: Quarterly cash distributions were declared and paid for Series A and Series B Preferred Units.
- Risks and Contingencies:
- COVID-19: Ongoing operational and logistical challenges affecting the industry.
- Market Conditions: Fluctuations in charter rates, vessel values, and LNG supply/demand.
- Interest Rates: Potential impact of the discontinuance of LIBOR after 2021 on debt interest rates.
- Operational Risks: Vessel breakdowns, off-hires, bunker price volatility, and geopolitical disruptions.
Key Facts for Investor Verification
- Fleet Utilization: Verify the 100% fleet utilization rate and the specific terms of the new Equinor charter for the Arctic Aurora.
- Debt Structure: Confirm the $591.0 million outstanding indebtedness under the $675.0 million credit facility and the $48.0 million portion repayable within one year.
- Revenue Backlog: Validate the $1.09 billion estimated contracted revenue backlog and the 7.4-year average remaining contract term.
- Non-GAAP Reconciliations: Review Appendix B for the reconciliation of Adjusted EBITDA and Adjusted Net Income to GAAP measures, noting the impact of derivative instrument gains/losses.
- Liquidity Position: Assess the $86.8 million total cash position (including $50.0 million restricted cash) against upcoming debt maturities and distribution obligations.