Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Press Release dated February 18, 2015)
Reporting Period: Three months and full year ended December 31, 2014
Business Overview: Dynagas is a growth-oriented partnership owning and operating LNG carriers on multi-year charters. As of December 31, 2014, the fleet consisted of five LNG carriers with a total capacity of approximately 759,100 cubic meters. The partnership achieved 100% fleet utilization for both the quarter and the full year.
Key Financial Metrics
| Metric (in millions, except per unit) | Q4 2014 | Q4 2013 | Full Year 2014 | Full Year 2013 |
|---|---|---|---|---|
| Voyage Revenues | $36.4 | $21.7 | $107.1 | $85.7 |
| Net Income | $15.3 | $11.0 | $50.6 | $45.6 |
| Adjusted Net Income | $15.7 | $11.2 | $52.6 | $41.4 |
| Adjusted EBITDA | $28.7 | $17.5 | $84.8 | $64.7 |
| Distributable Cash Flow | $18.6 | $12.9 | $59.8 | $46.8 |
| Adjusted EPS (Common Unit) | $0.44 | $0.52 | $1.64 | $2.68 |
| Cash & Cash Equivalents | $35.9 million (as of Dec 31, 2014) | |||
| Total Indebtedness | $575.0 million (as of Dec 31, 2014) | |||
| Available Liquidity | $65.9 million (as of Dec 31, 2014) |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 67.8% year-over-year for the full year 2014 ($107.1M vs $85.7M) and 67.8% for the quarter ($36.4M vs $21.7M). This growth is primarily attributed to the acquisition of two additional LNG carriers, the Arctic Aurora and Yenisei River, from the Sponsor in June and September 2014, respectively.
- Profitability: Net income rose 10.8% for the full year and 39.1% for the quarter. Adjusted EBITDA increased 30.9% for the year and 63.7% for the quarter.
- Operating Expenses: Vessel operating expenses increased 41.2% for the year ($16.8M vs $11.9M) due to the larger fleet size. Daily operating expenses per vessel rose to $12,139 in 2014 from $10,876 in 2013.
- Interest Costs: Interest and finance costs increased by approximately $5.1 million for the year due to higher weighted average interest rates and increased indebtedness related to the issuance of Senior Notes.
- Fleet Expansion: Fleet capacity increased by approximately 69% on a cubic meter basis in 2014, growing from 3 to 5 vessels.
Guidance, Outlook, and Management Commentary
- Contract Coverage: As of February 18, 2015, the fleet is 100% contracted through the end of 2016 and 80% contracted for 2017. The contracted revenue backlog is approximately $670.9 million with an average remaining duration of 5.0 years.
- Distributions: The Board declared a quarterly cash distribution of $0.4225 per unit for Q4 2014, an 8.3% increase over the prior quarter. This represents a 15.8% aggregate increase since the IPO in November 2013.
- Growth Strategy: Management intends to focus on fleet growth, contract coverage, and safe operations. The partnership has the right to acquire five additional "Optional Vessels" currently owned by the Sponsor.
- Listing Change: Common units and Senior Notes Due 2019 were transferred from NASDAQ to the NYSE in December 2014.
- 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
- Non-GAAP Reconciliations: Verify the reconciliation of Adjusted Net Income, Adjusted EBITDA, and Distributable Cash Flow to GAAP Net Income in Appendix B, as these are key performance metrics used by management.
- Debt Structure: Review the terms of the $575.0 million total indebtedness, including the $325.0 million revolving credit facility (3.1% weighted average rate) and the $250.0 million Senior Notes Due 2019.
- Contract Backlog: Confirm the $670.9 million revenue backlog and the specific terms of the time charters extending through 2016 and 2017.
- Capital Expenditures: Assess the estimated maintenance and replacement capital expenditure reserves deducted to calculate Distributable Cash Flow ($2.6M and $8.9M for the year, respectively).
- Related Party Transactions: Review the extent of related party expenses, including management fees and vessel operating expenses, as the Manager is Dynagas Ltd.