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, 2018
Filing Date: July 27, 2018
Business Overview: Owner and operator of six liquefied natural gas (LNG) carriers with an aggregate capacity of approximately 914,000 cubic meters. The fleet operates primarily on multi-year time charters.
Key Financial Metrics
| Metric (in thousands, except per unit) | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2018 |
|---|---|---|
| Voyage Revenues | $30,892 | $64,796 |
| Net Income (Loss) | $351 | $5,191 |
| Adjusted Net Income | $4,526 | $11,758 |
| Adjusted EBITDA | $24,443 | $51,033 |
| Distributable Cash Flow | $8,670 | $19,956 |
| Loss per Common Unit (GAAP) | $(0.04) | $0.05 |
| Adjusted EPS (Common) | $0.08 | $0.24 |
| Free Cash | $57,818 (as of June 30, 2018) | N/A |
| Total Indebtedness | $725.2 million (as of June 30, 2018) | N/A |
| Available Liquidity | $87.8 million (as of June 30, 2018) | N/A |
Material Changes vs. Prior Period
- Net Income: Q2 2018 net income was $0.4 million, a significant improvement from a net loss of $5.2 million in Q2 2017. This $5.5 million increase was driven by a $2.7 million reduction in dry-dock and special survey costs (only one vessel vs. three in 2017), a $1.6 million decrease in operating expenses due to efficiencies, and a $1.1 million decrease in interest costs (excluding one-time refinancing charges in 2017).
- Revenues: Voyage revenues decreased 3.4% to $30.9 million in Q2 2018 compared to $32.0 million in Q2 2017. This decline was attributed to 12 off-hire days for the Arctic Aurora during dry-docking and lower hire rates for the Ob River following the completion of its previous charter.
- Operating Expenses: Vessel operating expenses decreased to $5.9 million (daily rate of $10,808) from $7.5 million (daily rate of $13,720) in the prior year, reflecting crewing and technical efficiencies.
- Utilization: Fleet utilization improved to 97% in Q2 2018 compared to 95% in Q2 2017.
Guidance, Outlook, and Management Commentary
- Contract Coverage: Management reports significant cash flow visibility with contracted vessel employment for approximately 85% of 2018, 99% of 2019, and 100% of 2020. The estimated fleet-wide average remaining contract duration is 10.1 years.
- Revenue Backlog: As of July 27, 2018, the contracted revenue backlog was approximately $1.44 billion.
- Vessel Status:
- Clean Energy: Commenced an eight-year time charter with Gazprom on July 13, 2018.
- Yenisei River: Completed a five-year contract with Gazprom on July 21, 2018; undergoing a five-year special survey expected to complete in mid-August 2018. Expected to operate in the short-term market before commencing a 15-year contract with Yamal.
- Lena River: Expected to redeliver from Gazprom in October 2018, undergo a special survey, and then enter a multi-month charter before its 15-year Yamal contract.
- Distributions: Paid a quarterly cash distribution of $0.25 per common unit for Q2 2018. Announced a distribution of $0.5625 per Series A Preferred Unit for the period May 12 to August 11, 2018.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, dry-docking costs, and potential disruption of shipping routes due to political events or accidents.
Investor Verification Checklist
- Contract Conditions: Verify the status of conditions precedent for time charter contracts with Yamal Trade Pte., as failure to satisfy these could result in cancellation or amendment.
- Dry-Docking Schedule: Confirm the completion dates and costs associated with the special surveys for the Yenisei River and Lena River to assess potential near-term off-hire impacts.
- Debt Maturity: Review the repayment schedule for the $250.0 million senior unsecured notes due October 2019 and the $4.8 million of indebtedness repayable within one year.
- Non-GAAP Reconciliations: Review Appendix B for the reconciliation of Adjusted Net Income, Adjusted EBITDA, and Distributable Cash Flow to GAAP measures to understand the impact of non-cash items and class survey costs.