Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Three months and year ended December 31, 2019
Filing Date: March 16, 2020
Business Overview: Owner and operator of six LNG carriers employed on multi-year charters. As of March 12, 2020, the fleet operated at 100% utilization with an average remaining contract term of 8.6 years.
Key Financial Metrics
| Metric (in thousands, except per unit) | Q4 2019 | Q4 2018 | Full Year 2019 | Full Year 2018 |
|---|---|---|---|---|
| Voyage Revenues | $34,317 | $31,019 | $130,901 | $127,135 |
| Net Income / (Loss) | $5,529 | $(924) | $3,613 | $3,613 |
| Adjusted EBITDA | $23,991 | $21,587 | $90,357 | $96,094 |
| Distributable Cash Flow | $10,165 | $5,522 | $27,861 | $32,984 |
| Operating Cash Flow | $13,472 | $9,014 | $43,177 | $42,994 |
| Total Debt (Gross) | As of Dec 31, 2019: $663.0 million (Credit Facility) | |||
| Cash & Equivalents | ||||
| Time Charter Equivalent (TCE) Rate | $60,764/day | $56,783/day | $58,535/day | $57,972/day |
Material Changes vs. Prior Period
- Profitability: Q4 2019 Net Income turned positive at $5.5 million compared to a loss of $0.9 million in Q4 2018, a 711% increase. This was driven by higher voyage revenues and reduced dry-docking/survey costs.
- Revenue Growth: Voyage revenues increased by $3.3 million (10.6%) in Q4 2019, primarily due to the Lena River vessel entering a multi-year contract with Yamal LNG in July 2019.
- Cost Management: Interest and finance costs decreased by 16.0% ($2.1 million) in Q4 2019 due to lower weighted average interest rates following the repayment of senior unsecured notes.
- Debt Reduction: The Partnership repaid $250 million in 6.25% senior unsecured notes in October 2019. Outstanding indebtedness under the Credit Facility stood at $663.0 million as of December 31, 2019.
- Operating Expenses: Vessel operating expenses increased to $7.1 million in Q4 2019 from $6.4 million in Q4 2018, attributed to higher crewing and technical expenditures.
Guidance, Outlook, and Risks
- Fleet Outlook: The fleet is fully utilized with 100% contracted coverage for 2020, 92% for 2021, and 83% for 2022. The earliest re-chartering availability is Q3 2021.
- Revenue Backlog: Estimated contracted revenue backlog is $1.24 billion with an average remaining term of 8.6 years.
- Deleveraging Strategy: Management expects to deleverage debt over time using cash flows from term charters to service the $675 million senior secured term loan, positioning the company for future growth.
- Risks: Forward-looking statements are subject to risks including global economic strength, currency fluctuations, charter rate volatility, bunker prices, regulatory changes, and potential disruptions to shipping routes or public health threats.
Investor Verification Checklist
- Debt Structure: Verify the terms and interest rates of the remaining $663 million Credit Facility and the $30 million revolving credit facility with the Sponsor.
- Non-GAAP Reconciliations: Review Appendix B for the reconciliation of Adjusted EBITDA and Distributable Cash Flow to GAAP Net Income, noting the exclusion of non-cash amortization and survey costs.
- Preferred Unit Obligations: Confirm the quarterly distribution rates for Series A ($0.5625) and Series B ($0.546875) preferred units and their impact on cash available to common unitholders.
- Contractual Exposure: Assess the concentration risk related to the Yamal LNG contracts, noting that $0.17 billion of the revenue backlog is variable based on operating costs.
- Liquidity Position: Verify the composition of the $66.2 million cash balance, specifically the $50.0 million classified as restricted cash.