Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NasdaqGS: DLNG)
Filing Type: Form 6-K (Press Release)
Reporting Period: Three and six months ended June 30, 2014
Business Overview: Owner and operator of LNG carriers employed on multi-year charters. As of August 6, 2014, the fleet consisted of four LNG carriers with an aggregate capacity of 604,100 cubic meters.
Key Financial Metrics
| Metric | 3 Months Ended June 30, 2014 | 6 Months Ended June 30, 2014 |
|---|---|---|
| Voyage Revenues | $20.9 million | $41.9 million |
| Net Income | $10.2 million | $21.2 million |
| Adjusted EBITDA (Non-GAAP) | $16.7 million | $33.0 million |
| Distributable Cash Flow (Non-GAAP) | $12.6 million | $24.9 million |
| Operating Income | $12.3 million | $25.1 million |
| Net Cash from Operating Activities | N/A | $33.2 million |
| Total Indebtedness (as of June 30, 2014) | $335.0 million | |
| Total Available Liquidity (as of June 30, 2014) | $73.6 million | |
| Fleet Utilization | 100% | |
| Average Daily Hire (Gross of commissions) | $77,200 | $77,500 |
Material Changes vs. Prior Period
- Net Income: Decreased 11.3% year-over-year for the quarter ($10.2M vs. $11.5M) and 6.5% for the six-month period ($21.2M vs. $22.7M).
- Operating Income: Decreased 10.9% for the quarter and 8.0% for the six-month period compared to 2013.
- Adjusted EBITDA: Decreased 2.8% for the quarter and 3.1% for the six-month period.
- Distributable Cash Flow: Increased 11.8% for the quarter and 11.9% for the six-month period compared to the prior year.
- Expenses: Vessel operating expenses increased 14.3% (quarter) and 5.7% (six months) due to crew costs and the partial operation of the newly acquired Arctic Aurora. General and administrative costs increased due to public company expenses.
- Interest Costs: Decreased approximately $0.2 million (quarter) and $0.6 million (six months) due to lower weighted outstanding indebtedness.
Guidance, Outlook, and Recent Developments
- Acquisition: Completed acquisition of the Arctic Aurora (155,000 cbm ice class LNG carrier) on June 23, 2014, for $235 million. Funded via a follow-on offering and new credit facility.
- Capital Raise: Closed a follow-on public offering of 5,520,000 common units on June 18, 2014, raising net proceeds of $120.6 million.
- Debt Refinancing: Established a new $340 million senior secured revolving credit facility to refinance prior debt and fund the acquisition.
- Distributions: Declared a quarterly cash distribution of $0.365 per unit for Q2 2014. Approved an increase of $0.025 per unit effective for the quarter ending September 30, 2014 (annualized increase of 6.8% since IPO).
- Contract Backlog: As of August 6, 2014, 100% of fleet calendar days are contracted through 2016, and 75% through 2017. Total contracted revenue backlog is approximately $625.3 million with an average remaining duration of 6.0 years.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, drydocking costs, and geopolitical disruptions.
Investor Verification Checklist
- Verify the impact of the $0.9 million non-recurring non-cash time charter amortization expense on net income.
- Confirm the utilization of the new $340 million credit facility and the terms of the refinanced debt.
- Review the reconciliation of Adjusted EBITDA and Distributable Cash Flow to Net Income in Appendix B to understand non-GAAP adjustments.
- Assess the sustainability of the 100% fleet utilization rate and the contracted revenue backlog through 2016.
- Monitor the increase in daily operating expenses ($12,317 vs. $11,095 in prior year) and its effect on future margins.