Business Context and Reporting Period
This Form 6-K filing by Dynagas LNG Partners LP (NYSE: DLNG) covers the month of December 2015, with the report dated December 21, 2015. The Partnership is a growth-oriented entity formed to own and operate liquefied natural gas (LNG) carriers on multi-year charters. As of the filing date, the fleet consisted of five LNG carriers.
Key Financial Metrics and Transaction Details
The filing centers on a material acquisition and financing activity rather than a standard periodic financial report. Key metrics include:
- Acquisition Price: $240.0 million for the Lena River, a 155,000 cubic meter ice-class LNG carrier.
- Financing Structure:
- $72.0 million from net proceeds of Series A Preferred Units (July 2015).
- $133.0 million from a new $200 million senior term loan facility.
- $35.0 million from Sponsor Credit Financing.
- Projected Revenue: Approximately $86.6 million in incremental contracted revenues over the remaining minimum charter term (expires October 2018).
- Projected Cash Flow: Approximately $24.8 million in estimated net cash from operations for the first 12 months post-acquisition.
- Debt Terms: The $200 million term loan is secured by the Lena River and Yenisei River, with a maturity in January 2021.
Material Changes and Strategic Developments
The primary material change is the expansion of the fleet from five to six vessels through the acquisition of the Lena River from Dynagas Holding Ltd. (the Sponsor). This transaction represents the third vessel acquired from the Sponsor since the Partnership's initial public offering, effectively doubling the fleet size over a two-year period. The vessel is currently operating under a five-year time charter with Gazprom Global LNG Limited.
Guidance, Outlook, and Management Commentary
Management intends to recommend a quarterly cash distribution increase to the Board of Directors following the acquisition's completion.
- Proposed Distribution: An increase of 4% to 6%, resulting in a quarterly distribution of $0.4394 to $0.4479 per common and subordinated unit.
- Effective Date: Proposed for the quarter ending March 31, 2016.
- Annualized Impact: Would result in annualized distributions of $1.76 to $1.79 per unit, representing a 21% to 23% increase since the IPO.
- Conditions: The increase is contingent upon the closing of the acquisition, Board approval, and the absence of material adverse developments.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, drydocking costs, and geopolitical disruptions to shipping routes.
Investor Verification Checklist
- Confirm the closing of the Lena River acquisition by December 31, 2015.
- Verify the Board of Directors' formal approval of the proposed distribution increase.
- Monitor the drawdown of the remaining $67.0 million under the $200 million term loan facility in early 2016 to repay Sponsor Credit Financing.
- Assess the impact of the new debt service obligations (quarterly installments of ~$1.56 million per tranche) on future liquidity.
- Review the status of the Gazprom Charter to ensure no off-hire events or early terminations occur.