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, 2016
Business Overview: Owner and operator of liquefied natural gas (LNG) carriers employed on multi-year charters. The fleet consists of six LNG carriers with an aggregate capacity of approximately 913,980 cubic meters.
Key Financial Metrics
| Metric | 3 Months Ended Sept 30, 2016 | 9 Months Ended Sept 30, 2016 |
|---|---|---|
| Voyage Revenues | $43.1 million | $128.5 million |
| Net Income | $17.3 million | $51.4 million |
| Adjusted EBITDA (Non-GAAP) | $35.4 million | $105.6 million |
| Distributable Cash Flow (Non-GAAP) | $23.0 million | $68.3 million |
| Earnings Per Common Unit | $0.44 | $1.30 |
| Adjusted EPS (Non-GAAP) | $0.49 | $1.45 |
| Cash and Cash Equivalents | $59.1 million (as of Sept 30, 2016) | |
| Total Indebtedness | $730.6 million (as of Sept 30, 2016) | |
| Available Liquidity | $114.1 million (as of Sept 30, 2016) |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 16.4% year-over-year for the three months ended September 30, 2016, driven by an increase in revenue-earning days from 460 to 552 due to fleet expansion (acquisition of the Lena River).
- Profitability: Net income rose 7.7% to $17.3 million, while Adjusted EBITDA increased 22.0% to $35.4 million compared to the same period in 2015.
- Operating Expenses: Vessel operating expenses increased by $1.1 million to $6.7 million, exclusively attributable to the addition of the Lena River.
- Utilization: The fleet operated at 100% utilization during the quarter.
Guidance, Outlook, and Management Commentary
Management Commentary: CEO Tony Lauritzen described the third quarter as a "record financial quarter," citing 100% fleet utilization and a 20% increase in Adjusted Earnings per common unit. The company emphasizes that revenues are derived from fixed long-term charters, insulating them from commodity price fluctuations.
Recent Developments:
- New Charter: Secured a new 7-year, 9-month charter for the Clean Energy with Gazprom, commencing July 2018, expected to generate $133.0 million in gross revenue.
- Charter Amendments: Agreed to reduce charter hire rates for the Lena River and Yenisei River effective November 1, 2016, resulting in an estimated $18.3 million reduction in gross contracted revenues over the remaining terms.
- Contract Backlog: Despite the rate reductions, the combined contract backlog increased by approximately $115 million to $1.61 billion, with an average remaining contract duration of 11.0 years.
- Coverage: Fleet is 100% contracted through 2016, 89% through 2017, and 75% through 2018.
Distributions: Paid $0.4225 per common unit for Q3 2016 and $0.5625 per Series A Preferred unit for the period ending November 11, 2016.
Risks: Forward-looking statements are subject to uncertainties including global economic conditions, charter rate fluctuations, bunker prices, drydocking costs, and potential vessel breakdowns or off-hires.
Investor Verification Checklist
- Charter Rate Impact: Verify the long-term financial impact of the $18.3 million revenue reduction on the Lena River and Yenisei River charters versus the new Clean Energy contract.
- Liquidity Position: Confirm the $114.1 million available liquidity figure, which includes $30.0 million in borrowing capacity under a revolving credit facility with the Sponsor.
- Debt Maturity: Review the $32.5 million of debt repayable within one year against current cash reserves.
- Non-GAAP Reconciliations: Review Appendix B for reconciliations of Adjusted EBITDA, Adjusted Net Income, and Distributable Cash Flow to GAAP measures.
- Fleet Utilization: Monitor the ability to maintain 100% utilization as contracts mature in 2017 and 2018.