Business Context and Reporting Period
Dynagas LNG Partners LP (NYSE: DLNG) is a growth-oriented partnership owning and operating liquefied natural gas (LNG) carriers. This Form 6-K, dated May 17, 2016, reports unaudited financial results for the three months ended March 31, 2016. The Partnership operates a fleet of six LNG carriers, all of which achieved 100% utilization during the quarter.
Key Financial Metrics
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Voyage Revenues | $42.7 million | $35.6 million |
| Net Income (GAAP) | $17.1 million | $14.9 million |
| Adjusted Net Income | $18.9 million | $15.2 million |
| Adjusted EBITDA | $35.2 million | $28.1 million |
| Distributable Cash Flow | $22.7 million | $18.0 million |
| Adjusted EPS (Common Unit) | $0.48 | $0.43 |
| Cash and Cash Equivalents | $54.0 million | $18.2 million |
| Total Indebtedness | $746.9 million | Filing text does not provide Q1 2015 total debt |
Liquidity: As of March 31, 2016, the Partnership held $79.0 million in total cash (including restricted cash) and had $30.0 million of available borrowing capacity under a revolving credit facility.
Distributions: The Board declared a quarterly cash distribution of $0.4225 per common unit and $0.5625 per Series A Preferred Unit, paid on May 12, 2016.
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 20.0% year-over-year, driven by an increase in revenue-earning days from 450 to 546 due to the acquisition of the Lena River in December 2015.
- Profitability: Adjusted EBITDA rose 25.3% to $35.2 million, and Adjusted Net Income increased 24.4% to $18.9 million, primarily attributable to the Lena River's contribution.
- Operating Expenses: Vessel operating expenses increased by $0.9 million to $6.4 million, exclusively due to the addition of the Lena River.
- Cash Flow: Net cash from operating activities decreased to $23.6 million from $26.4 million in the prior year, attributed to variations in operating assets and liabilities offsetting the new vessel's cash flow contribution.
Outlook, Management Commentary, and Risks
Contract Backlog: The Partnership secured three new long-term charters, increasing its contracted revenue backlog to approximately $1.6 billion with an average remaining duration of 10.3 years.
- Lena River and Yenisei River: 15-year charters with Yamal Trade Pte. for the Yamal LNG Project (delivery windows starting Jan 2019 and June 2019).
- Ob River: 10-year charter with Gazprom, commencing in direct continuation of the current charter.
Management Commentary: CEO Tony Lauritzen highlighted the strong financial quarter and 100% fleet utilization. The strategy remains focused on securing contract coverage and managing operating expenses to support distribution sustainability.
Risks and Contingencies:
- The time charter contracts with Yamal are subject to important conditions; failure to satisfy these may result in cancellation and loss of contracted revenues.
- Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, and geopolitical events affecting shipping routes.
Investor Verification Checklist
- Verify the satisfaction of conditions precedent for the Yamal LNG Project charters (Lena River and Yenisei River) to ensure the $1.0 billion in incremental revenue is secured.
- Review the reconciliation of Non-GAAP measures (Adjusted EBITDA, Distributable Cash Flow) in Appendix B to understand adjustments made to GAAP Net Income.
- Monitor the $30.0 million revolving credit facility availability and the $746.9 million total indebtedness level relative to future debt maturities.
- Confirm the 100% fleet utilization rate is maintained as the fleet expands and new vessels enter service in 2019.