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, 2015 (Unaudited)
Business Overview: Owner and operator of LNG carriers employed on multi-year time charters. As of June 30, 2015, the fleet consisted of five LNG carriers with an aggregate capacity of approximately 759,100 cubic meters.
Key Financial Metrics
| Metric (in thousands, except per unit) | 3 Months Ended June 30, 2015 |
6 Months Ended June 30, 2015 |
|---|---|---|
| Voyage Revenues | $35,551 | $71,171 |
| Net Income | $14,303 | $29,181 |
| Adjusted Net Income (Non-GAAP) | $14,605 | $29,818 |
| Adjusted EBITDA (Non-GAAP) | $27,569 | $55,635 |
| Distributable Cash Flow (Non-GAAP) | $17,433 | $35,409 |
| Adjusted EPS (Non-GAAP) | $0.41 | $0.84 |
| Cash and Cash Equivalents (as of June 30, 2015) | $12,456 | |
| Total Indebtedness (as of June 30, 2015) | $565,000 | |
| Total Available Liquidity (as of June 30, 2015) | $66,500 |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 70.4% for the three months and 69.9% for the six months ended June 30, 2015, compared to the same periods in 2014. This was primarily driven by the full-quarter operation of two additional vessels (Arctic Aurora and Yenisei River) acquired in 2014.
- Profitability: Net income rose 40.0% (QTD) and 37.3% (YTD). Adjusted EBITDA increased significantly by 62.2% (QTD) and 66.2% (YTD).
- Operating Expenses: Vessel operating expenses increased due to fleet expansion. Daily operating expenses per vessel rose to $13,149 (QTD 2015) from $12,317 (QTD 2014).
- Interest Costs: Interest and finance costs increased by approximately $4.8 million (QTD) and $9.6 million (YTD) due to higher weighted average interest rates and increased indebtedness from 2014 financing activities.
- Utilization: Fleet utilization was 97% for the three months and 99% for the six months ended June 30, 2015, compared to 100% in the prior year periods.
Guidance, Outlook, and Recent Developments
- Charter Coverage: As of August 25, 2015, the fleet was 100% contracted through the end of 2016 and 80% contracted through 2017. The contracted revenue backlog was approximately $596.3 million with an average remaining duration of 4.5 years.
- Recent Charter: The vessel Amur River commenced a new 13-year time charter with Gazprom Global LNG Limited in June 2015, adding an estimated $307.4 million to the revenue backlog.
- Capital Markets: On July 20, 2015, the Partnership completed an offering of 3,000,000 Series A Cumulative Redeemable Preferred Units at $25.00 per unit. Proceeds are intended to finance the acquisition of a vessel from the Sponsor.
- Distributions: A quarterly cash distribution of $0.4225 per unit was declared for Q2 2015 and paid on August 13, 2015.
- Outlook: Management intends to focus on fleet growth, contract coverage, and safe operations. The Partnership has the right to acquire five additional "Optional Vessels" from its Sponsor.
Investor Verification Checklist
- Non-GAAP Reconciliations: Verify the adjustments made to Net Income to arrive at Adjusted EBITDA and Distributable Cash Flow, specifically regarding charter hire amortization and capital expenditure reserves.
- Debt Structure: Review the terms of the $340 million Senior Secured Credit Facility and the $250 million Senior Unsecured Notes, noting the weighted average interest rate of approximately 3.2% on the credit facility.
- Preferred Unit Terms: Confirm the dividend obligations and redemption features of the newly issued Series A Preferred Units.
- Utilization Rates: Note that reported utilization excludes idle periods where ballast bonuses were received; verify the impact of these bonuses on cash flow stability.
- Related Party Transactions: Review the extent of management fees and vessel acquisitions from the Sponsor (Dynagas Holding Ltd.).