Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2022
Filing Date: June 28, 2022
Business Overview: The Partnership owns and operates a fleet of six LNG carriers employed on multi-year time charters with international gas producers. As of June 27, 2022, the fleet maintained 100% utilization for the eighth consecutive quarter.
Key Financial Metrics
| Metric (in thousands, except per unit) | Q1 2022 | Q1 2021 |
|---|---|---|
| Voyage Revenues | $33,260 | $33,448 |
| Net Income | $23,882 | $15,865 |
| Adjusted Net Income | $10,039 | $10,564 |
| Adjusted EBITDA | $22,938 | $23,860 |
| Operating Income | $12,557 | $15,763 |
| Net Cash from Operating Activities | $24,848 | $22,942 |
| Earnings Per Common Unit (Basic/Diluted) | $0.57 | $0.36 |
| Adjusted Earnings Per Common Unit | $0.19 | $0.21 |
Liquidity and Debt:
- Total Cash: $106.6 million (including $50.0 million restricted cash) as of March 31, 2022.
- Outstanding Indebtedness: $555.0 million under a $675.0 million credit facility.
- Debt Repayment: $12.0 million repaid during the quarter.
- Unused Availability: $30.0 million under a revolving credit facility with the Sponsor.
Material Changes vs. Prior Period
- Net Income Increase: Net income rose 50.3% to $23.9 million, primarily driven by a significant gain on interest rate swap transactions ($16.4 million in Q1 2022 vs. $5.6 million in Q1 2021).
- Adjusted Net Income Decline: Adjusted Net Income decreased 5.7% to $10.0 million due to higher vessel operating expenses and dry-docking costs.
- Operating Expenses: Vessel operating expenses increased to $7.6 million (daily rate of $14,000) from $6.9 million (daily rate of $12,739) due to planned technical maintenance and supply costs.
- Dry-Docking Impact: The vessel Clean Energy commenced a scheduled dry-dock on March 16, 2022, resulting in $2.6 million in dry-docking and special survey costs and a temporary reduction in revenue for that vessel.
- Interest Costs: Net interest and finance costs decreased 7.3% to $5.1 million due to reduced debt levels, partially offset by a higher weighted average interest rate.
Outlook, Risks, and Management Commentary
Management Commentary: Management highlighted a period of high demand for LNG shipping. The strategy remains focused on using cash flow to deleverage the balance sheet and reinforce liquidity to build equity value. The fleet operates under long-term charters with an average remaining contract term of 6.6 years.
Revenue Backlog: As of June 27, 2022, the estimated contracted revenue backlog was $0.98 billion. Fleet coverage is estimated at 100% for 2022, 96% for 2023, and 83% for 2024.
Risks and Contingencies:
- Geopolitical/Sanctions: The Partnership monitors sanctions related to the conflict in Ukraine. While current U.S. and E.U. regimes do not materially affect operations, three vessels (Amur River, Ob River, Clean Energy) have charters effectively under German government control due to the status of Gazprom Germania. The Partnership cannot assure that future sanctions or escalation will not impact its business.
- Forward-Looking Statements: Risks include fluctuations in charter rates, bunker prices, vessel values, and the potential discontinuance of LIBOR after June 30, 2023.
Key Facts for Investor Verification
- Non-GAAP Reconciliations: Verify the reconciliation of Net Income to Adjusted EBITDA and Adjusted Net Income in Appendix B, noting the exclusion of the $16.4 million gain on derivative instruments.
- Sanctions Exposure: Confirm the specific contractual status of the three vessels linked to Gazprom entities and the implications of German government control over those charters.
- Dry-Docking Schedule: Review the impact of the Clean Energy dry-dock on Q1 revenue and the schedule for future vessel maintenance.
- Debt Maturity: Note that $48.0 million of the $555.0 million debt is repayable within one year.
- Preferred Distributions: Verify the declared distributions for Series A ($0.5625) and Series B ($0.546875) preferred units for the periods ending in May 2022.