Business Context and Reporting Period
This Form 6-K filing by Dynagas LNG Partners LP (NYSE: DLNG) covers the month of November 2016, with the report dated November 1, 2016. The Partnership is a growth-oriented entity owning and operating a fleet of six LNG carriers, specializing in conventional and ice-classed LNG shipping. The filing primarily discloses new charter arrangements with Gazprom.
Key Financial Metrics and Contract Values
- Contracted Backlog: Increased to approximately $1.6 billion as of November 1, 2016, up from $1.5 billion prior to the new agreements.
- New Revenue Commitment: A new long-term time charter for the vessel Clean Energy is expected to generate gross contracted revenue of approximately $133 million over a firm duration of about 7 years and 9 months, commencing in July 2018.
- Revenue Reductions: Amendments to existing charters for the Yenisei River and Lena River will reduce contracted revenues by approximately $8.7 million and $9.6 million, respectively, over their remaining terms (expiring July and September 2018).
- Financial Statements: This filing does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity for the reporting period.
Material Changes Versus Prior Period
The primary material change is the restructuring of the Partnership's charter portfolio:
- New Long-Term Charter: Secured a 7-year, 9-month charter for the Clean Energy (the Partnership's only non-ice classed vessel) with Gazprom Marketing & Trading Singapore Pte Ltd.
- Charter Amendments: Agreed to reduce charter income on the Yenisei River and Lena River effective November 1, 2016, in connection with the new Clean Energy employment.
- Backlog Growth: The net effect of these transactions increased the total contracted backlog by $100 million.
Guidance, Outlook, and Risks
Management Commentary: CEO Tony Lauritzen stated that the new arrangements improve the charter profile and represent a low-risk, economical solution for the Clean Energy by employing it as a conventional LNG carrier rather than converting it to an FSRU. The vessel will undergo a statutory class five-year special survey and dry-docking in Q2 2017 before seeking shorter-term employment until the Gazprom charter begins in July 2018.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Key risks cited include fluctuations in charter rates and vessel values, changes in LNG demand, operating expense volatility (bunker prices, drydocking, insurance), availability of financing, regulatory changes, and potential disruptions to shipping routes due to political events or accidents.
Important Facts for Investor Verification
- Verify the exact commencement date of the Clean Energy Gazprom charter (expected July 2018) and the interim employment strategy for Q2 2017 to mid-2018.
- Confirm the impact of the $18.3 million total revenue reduction on the Yenisei River and Lena River on the Partnership's near-term cash flow.
- Review the Partnership's liquidity position to ensure it can fund the upcoming dry-docking and special survey for the Clean Energy in 2017.
- Monitor the execution of the new charter agreement to ensure the $133 million revenue projection is realized over the 7-year, 9-month term.