Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Three and nine months ended September 30, 2018
Filing Date: November 20, 2018
Business Overview: Owner and operator of six liquefied natural gas (LNG) carriers employed on multi-year charters. The fleet has an aggregate carrying capacity of approximately 914,000 cubic meters.
Key Financial Metrics
| Metric (in thousands, except per unit) | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2018 |
|---|---|---|
| Voyage Revenues | $31,320 | $96,116 |
| Net Income (Loss) | $(654) | $4,537 |
| Adjusted Net Income | $3,275 | $15,033 |
| Adjusted EBITDA | $23,474 | $74,507 |
| Distributable Cash Flow | $7,506 | $27,462 |
| Loss per Common Unit | $(0.07) | $(0.01) |
| Adjusted EPS (Common) | $0.04 | $0.28 |
| Free Cash | $59,536 (as of Sep 30, 2018) | N/A |
| Total Indebtedness | $724,000 (as of Sep 30, 2018) | N/A |
| Available Liquidity | $89,500 (as of Sep 30, 2018) | N/A |
Material Changes vs. Prior Period
- Net Income Decline: Reported a net loss of $0.7 million for Q3 2018 compared to net income of $4.0 million in Q3 2017. This decrease was driven by lower voyage revenues, increased dry-docking costs for the Yenisei River, and higher interest costs on variable debt.
- Revenue Decrease: Voyage revenues fell 6.4% to $31.3 million in Q3 2018 from $33.5 million in Q3 2017. This was primarily due to two vessels (Arctic Aurora and Ob River) rolling over into new charters at lower rates and 16.5 off-hire days for the Yenisei River during its special survey.
- Adjusted Metrics: Adjusted Net Income decreased 53.5% to $3.3 million, and Adjusted EBITDA decreased 11.2% to $23.5 million compared to the prior year quarter, largely attributable to the revenue decline.
- Operating Expenses: Vessel operating expenses increased to $6.4 million (daily rate of $11,632) from $6.2 million in the prior year, mainly due to spares costs associated with the Yenisei River dry-docking.
Guidance, Outlook, and Recent Developments
- Capital Raise: Completed a $55.0 million public offering of Series B Preferred Units (8.75% fixed-to-floating rate). Net proceeds were approximately $53.0 million, intended for general purposes including potential debt repayment or acquisitions.
- Distributions: Declared a quarterly cash distribution of $0.25 per common unit for Q3 2018 and $0.5625 per Series A Preferred Unit.
- Vessel Employment:
- Yenisei River: Completed dry-docking and commenced its multi-year charter with Yamal Trade Pte. early; the contract term was extended by 180 days to 15 years and 180 days.
- Lena River: Completed dry-docking in late October 2018 and entered a multi-month charter before its anticipated 2019 delivery to Yamal.
- Backlog: Contracted revenue backlog estimated at $1.42 billion with an average remaining contract term of 9.9 years. Fleet utilization was 99% in Q3 2018.
- Debt Refinancing: Management intends to refinance $250 million in unsecured notes due in October 2019 and is reviewing options.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, and potential disruptions to shipping routes.
Investor Verification Checklist
- Debt Maturity: Verify the status of the $250 million senior unsecured notes due October 30, 2019, and the refinancing strategy.
- Charter Rates: Confirm the impact of the lower charter rates on the Arctic Aurora and Ob River on future cash flows.
- Preferred Unit Dilution: Assess the impact of the new Series B Preferred Units on common unitholder distributions and capital structure.
- Yamal Project Conditions: Review the conditions precedent for the Yamal LNG charters, specifically regarding defaults under shipbuilding contracts held by affiliates.
- Liquidity Position: Monitor the $30 million revolving credit facility with the Sponsor and the $59.5 million free cash balance against upcoming debt obligations.