Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Press Release dated June 8, 2017)
Reporting Period: Three months ended March 31, 2017
Business Overview: Owner and operator of six LNG carriers employed on multi-year charters. The Partnership focuses on long-term fixed day-rate contracts to provide cash flow visibility, with an average remaining contract duration of 10.5 years.
Key Financial Metrics
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Voyage Revenues | $39.1 million | $42.7 million |
| Net Income | $12.9 million | $17.1 million |
| Adjusted Net Income | $14.7 million | $18.9 million |
| Adjusted EBITDA | $31.3 million | $35.2 million |
| Distributable Cash Flow | $18.6 million | $22.7 million |
| Earnings per Common Unit (GAAP) | $0.32 | $0.43 |
| Adjusted EPS (Non-GAAP) | $0.37 | $0.48 |
| Cash and Cash Equivalents | $50.9 million | N/A |
| Total Liquidity (Cash + Revolver) | $105.9 million | N/A |
| Total Indebtedness | $714.4 million | N/A |
Operational Metrics: Fleet utilization was 99% for the quarter. Average daily hire gross of commissions was approximately $76,700 per vessel.
Material Changes vs. Prior Period
- Revenue Decline: Voyage revenues decreased 8.5% year-over-year to $39.1 million. This was primarily driven by reduced charter hire rates on the Yenisei River and Lena River (effective November 2016) and unscheduled off-hire days for the Yenisei River.
- Profitability Decrease: Net income fell 24.6% to $12.9 million, and Adjusted EBITDA declined 11.1% to $31.3 million. The reduction is attributed to the charter rate adjustments and increased vessel operating expenses ($6.7 million vs. $6.4 million) due to scheduled special surveys and dry-docking for three steam turbine vessels.
- Debt Refinancing: In May 2017, the Partnership refinanced all existing secured bank debt with a new $480.0 million institutional senior secured Term Loan B due in 2023. This extends the maturity of secured debt from 2020/2021 to 2023 and is expected to increase net cash flow.
Guidance, Outlook, and Risks
- Contract Backlog: The Partnership maintains a contracted revenue backlog of approximately $1.52 billion. Fleet employment is contracted for 86% of 2017, 75% of 2018, and 75% of 2019.
- Strategic Shift: Management continues to prioritize long-term charters over short-term spot rates to ensure revenue visibility, even if short-term day rates are lower.
- Vessel Employment: The vessel Clean Energy was available in April 2017 and placed on short-term charters through August 2017, prior to its delivery to Gazprom in July 2018.
- Distributions: Quarterly cash distribution of $0.4225 per common unit was paid for Q1 2017. Series A Preferred Units received $0.5625 per unit.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, dry-docking costs, and potential off-hire days due to breakdowns or political events.
Investor Verification Checklist
- Verify the terms and interest rate of the new $480.0 million Term Loan B closed in May 2017.
- Confirm the specific duration and rate of the new long-term charter for the Clean Energy with Gazprom (July 2018 – March 2026).
- Review the schedule and estimated costs for the special surveys and dry-docking of the three steam turbine vessels in 2017.
- Monitor the utilization rates of the Yenisei River and Lena River following the charter rate reductions.
- Assess the impact of the conversion of 14,985,000 subordinated units to common units on future earnings per unit calculations.