Business context and reporting period
Dynagas LNG Partners LP’s Form 20-F is an annual report for the fiscal year ended December 31, 2021, filed April 29, 2022—not a standalone fourth-quarter report. The Partnership owns and operates six LNG carriers, all employed under multi-year time charters. Its reported financial statements are prepared under U.S. GAAP.
Financial and operating highlights
| Metric | 2021 | 2020 |
|---|---|---|
| Voyage revenue | $137.7 million | $137.2 million |
| Operating income | $64.6 million | $64.3 million |
| Net income | $53.3 million | $34.1 million |
| Adjusted EBITDA (non-GAAP) | $97.0 million | $96.5 million |
| Net cash from operating activities | $79.6 million | $68.6 million |
| Gross long-term debt | $567.0 million | $615.0 million |
| Cash and cash equivalents | $47.0 million | $25.0 million |
| Restricted cash | $50.0 million | $50.0 million |
Operating margin was approximately 46.9% and net margin approximately 38.7% in 2021, calculated from reported revenue and income. Common-unit earnings were $1.14 per unit versus $0.63 in 2020. The reported net-income improvement included a $10.1 million derivative gain in 2021, compared with a $3.1 million loss in 2020; the swap did not qualify for hedge accounting.
Fleet utilization was 100% (versus 99.8%); daily operating expenses rose to $13,534 from $13,128. The weighted-average debt interest rate fell to 3.1% from 3.7%. Working capital remained negative at $13.8 million, improving from a $35.7 million deficit. Operating cash flow exceeded net income; investing cash flow was nil. Financing cash use was $57.6 million, including $48.0 million of debt repayment.
Changes versus the prior year
- Revenue increased 0.4%; operating income increased 0.5%, while net income increased about 56%, reflecting lower interest expense and the favorable derivative fair-value change.
- Interest and finance costs declined 21% to $21.4 million, alongside lower average debt and interest rates.
- Vessel operating expenses increased 2.8%, and general and administrative expenses increased 24%, mainly due to higher technical maintenance and supply costs, D&O insurance, and consultancy costs.
- Gross debt declined by $48 million. The Partnership issued 1,189,667 common units through its at-the-market program during 2021, generating $3.3 million net proceeds.
Outlook, risks, and unusual items
- Management’s strategy is to prioritize debt repayment and balance-sheet strength; growth depends on access to debt or equity capital on acceptable terms. No specific earnings or revenue guidance is provided. Management believed available and expected cash sources would cover operations, working capital, debt service, and required preferred distributions for at least the next 12 months.
- The $675 million secured facility had $567 million outstanding at year-end, with $48 million scheduled principal payments in each of 2022 and 2023 and a $471 million balloon payment in 2024. It restricts common-unit distributions while borrowings remain outstanding. The $50 million restricted-cash balance is required collateral. The Partnership reported compliance with its covenants at December 31, 2021.
- Common-unit distributions have been suspended since May 2019; the credit facility prohibits them while outstanding. Series A and B preferred distributions continued, subject to no event of default. Preferred distributions paid in 2021 totaled $11.6 million.
- Charterer concentration is substantial: Gazprom represented 45%, Yamal 39%, and Equinor 16% of 2021 revenue. Five of six vessels were chartered to Russian-related counterparties. Management said sanctions imposed through the report date had not disrupted the charters, but further sanctions or escalation could affect employment and cash flow.
- After year-end, OFAC designated Amsterdam Trade Bank, a lender with approximately 3.6% participation in the credit facility. The facility’s agent notified the Partnership that the facility had been blocked and could not distribute payments to lenders pending resolution. The Partnership said it could continue making required payments to the agent and was evaluating alternatives.
- Dry-docking and ballast-water-treatment work creates cost and off-hire risk. Clean Energy completed dry-docking and installation in April 2022; Ob River and Amur River were scheduled for 2022. The filing estimates annual maintenance and replacement capital expenditures of $16.9 million.
- The Partnership recorded no vessel impairment. Its impairment assessment depends in part on uncertain future charter rates; management’s sensitivity analysis indicated that a decline of more than 40% in the assumed 10-year historical rates could change the conclusion.
- The 2021 financial statements received an unmodified audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Current status and consequences of the sanctions-related blockage affecting the $675 million facility, including lender payments, required installments, and covenant compliance.
- Whether Gazprom and Yamal charters continue uninterrupted, and any changes to sanctions, charter terms, or replacement employment for the five Russian-related vessels.
- Liquidity available for operations and debt service, distinguishing the $47.0 million unrestricted cash from the $50.0 million restricted balance; also monitor the working-capital deficit.
- Progress toward refinancing or repaying the $471 million 2024 balloon and transition of LIBOR-based agreements ahead of LIBOR cessation.
- Preferred distributions, any arrears or default restrictions, and the continuing prohibition on common-unit distributions.
- Actual dry-docking and ballast-water-system costs, off-hire days, and the assumptions supporting vessel values and impairment conclusions.