Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Press Release dated February 16, 2016)
Reporting Period: Three months and year ended December 31, 2015
Business Overview: Dynagas is a growth-oriented partnership owning and operating LNG carriers on multi-year charters. As of December 31, 2015, the fleet consisted of six vessels with an aggregate capacity of approximately 913,980 cubic meters. The Partnership's income is derived from contracted fixed charter rates unrelated to commodity prices.
Key Financial Metrics
| Metric (in millions, except per unit) | Q4 2015 | Q4 2014 | Full Year 2015 | Full Year 2014 |
|---|---|---|---|---|
| Voyage Revenues | $37.0 | $36.4 | $145.2 | $107.1 |
| Net Income (GAAP) | $14.8 | $15.3 | $60.1 | $50.6 |
| Adjusted Net Income (Non-GAAP) | $15.0 | $15.7 | $60.9 | $52.6 |
| Adjusted EBITDA (Non-GAAP) | $28.5 | $28.7 | $113.2 | $84.8 |
| Distributable Cash Flow (Non-GAAP) | $18.0 | $18.6 | $72.4 | $59.8 |
| Adjusted EPS (Common Unit) | $0.38 | $0.44 | $1.63 | $1.64 |
| Cash and Cash Equivalents (Year End) | $49.3 million (includes restricted cash) | |||
| Total Indebtedness (Year End) | $688.3 million |
Material Changes vs. Prior Period
- Revenue Growth: Full-year voyage revenues increased 35.6% to $145.2 million, driven by the addition of three LNG carriers (Arctic Aurora, Yenisei River, and Lena River) acquired from the Sponsor.
- Profitability: Full-year Adjusted EBITDA rose 33.6% to $113.2 million. However, Q4 Adjusted EBITDA decreased slightly by 0.6% compared to Q4 2014 due to increased operating costs.
- Operating Expenses: Vessel operating expenses increased by $6.4 million for the full year, primarily due to the operation of newly acquired vessels and increased technical maintenance.
- Interest Costs: Interest costs increased by $12.6 million year-over-year due to higher weighted average interest rates and increased outstanding indebtedness.
- Utilization: Fleet utilization remained high at 99% for the full year 2015 and 98% for Q4 2015.
Guidance, Outlook, and Management Commentary
- Recent Acquisition: Completed the acquisition of the Lena River (2013-built, 155,000 cbm ice class) for $240.0 million in December 2015. Funding included proceeds from Series A Preferred Units, a new $200 million term loan, and cash on hand.
- Distribution Outlook: Management intends to recommend a 4% to 6% increase in the quarterly cash distribution per common unit, targeting a range of $0.4394 to $0.4479, effective for the quarter ending March 31, 2016. This is subject to Board approval.
- Contract Coverage: As of February 16, 2016, the fleet is 100% contracted through 2016 and 83% through 2017. The contracted revenue backlog stands at approximately $607.7 million with an average remaining duration of 3.8 years.
- Future Growth: The Sponsor has contracted for five new "Yamal Vessels" (172,000 cbm ARC7 ice class) expected to be delivered between 2017 and 2019. These vessels, along with four other "Optional Vessels," are potential future dropdown candidates for the Partnership.
- Liquidity: The Partnership drew down the remaining $66.7 million of its new term loan facility in early 2016 to repay a $35.0 million credit financing from the Sponsor, significantly improving liquidity.
Investor Verification Checklist
- Board Approval: Verify if the Board approves the proposed 4-6% distribution increase for the Q1 2016 quarter.
- Debt Servicing: Monitor the impact of the new $200 million term loan facility on future interest expenses and cash flow coverage.
- Dropdown Execution: Track the timeline and terms for potential future acquisitions of the "Yamal Vessels" and "Optional Vessels" from the Sponsor.
- Operating Costs: Review trends in vessel operating expenses, particularly regarding technical maintenance and dry-docking costs for the aging fleet.
- Charter Rates: Confirm the stability of fixed charter rates and the risk of off-hires or redelivery delays affecting the 3.8-year average contract duration.