Business Context and Reporting Period
Dynagas LNG Partners LP (NYSE: DLNG), a master limited partnership owning and operating six LNG carriers, reported financial results for the three months and full year ended December 31, 2021. The filing, submitted on March 18, 2022, covers the fourth quarter of 2021 and the full fiscal year. The fleet operates under long-term time charters with an average remaining contract term of 6.9 years.
Key Financial Metrics
| Metric | Q4 2021 | Q4 2020 | Full Year 2021 | Full Year 2020 |
|---|---|---|---|---|
| Voyage Revenues ($ millions) | 35.7 | 34.4 | 137.7 | 137.2 |
| Net Income ($ millions) | 16.9 | 10.6 | 53.3 | 34.1 |
| Adjusted Net Income ($ millions) | 11.4 | 10.7 | 43.9 | 37.8 |
| Adjusted EBITDA ($ millions) | 24.7 | 24.4 | 97.0 | 96.5 |
| Earnings Per Unit (Basic/Diluted) | $0.38 | $0.22 | $1.14 | $0.63 |
| Adjusted Earnings Per Unit | $0.23 | $0.22 | $0.88 | $0.74 |
| Fleet Utilization | 100% | 100% | 100% | 99.8% |
| Operating Cash Flow ($ millions) | 21.0 | 14.2 | 79.6 | 68.6 |
| Total Cash & Restricted Cash ($ millions) | 97.0 | 75.0 | 97.0 | 75.0 |
| Outstanding Indebtedness ($ millions) | 567.0 | N/A | 567.0 | 607.7 |
Liquidity: As of December 31, 2021, the Partnership held $97.0 million in total cash (including $50.0 million restricted). Outstanding debt under the $675.0 million credit facility was $567.0 million, with $48.0 million due within one year. An additional $30.0 million interest-free revolving credit facility with the Sponsor remains available.
Material Changes vs. Prior Period
- Net Income Growth: Q4 2021 Net Income increased 59.4% year-over-year to $16.9 million, driven by higher voyage revenues and a $5.5 million gain on an interest rate swap transaction.
- Revenue Stability: Voyage revenues remained relatively flat, increasing slightly to $35.7 million in Q4 2021 from $34.4 million in Q4 2020. Average daily hire gross of commissions rose to approximately $64,500 per vessel from $62,700.
- Expense Increases: Vessel operating expenses rose to $8.2 million in Q4 2021 from $7.1 million in Q4 2020, primarily due to higher technical maintenance and supply costs.
- Debt Reduction: Interest and finance costs decreased 7.0% to $5.3 million due to lower weighted average interest rates and reduced average interest-bearing debt. Total long-term debt decreased from $607.7 million at year-end 2020 to $562.0 million at year-end 2021.
Outlook, Risks, and Management Commentary
Management Strategy: Management intends to use cash flow generation to deleverage the balance sheet and reinforce liquidity. The fleet maintains 100% utilization for the seventh consecutive quarter.
Revenue Backlog: As of March 17, 2022, the estimated contracted revenue backlog is $1.02 billion. Fleet coverage is estimated at 100% for the remainder of 2022, 96% for 2023, and 83% for 2024.
Risks and Contingencies:
- Geopolitical Risk: The Partnership is monitoring the conflict in Ukraine and associated sanctions. While current sanctions regimes exempt certain LNG shipping operations and the Partnership is in compliance, the full commercial impact remains uncertain. Risks include potential limitations on the SWIFT payment system or counterparty performance issues.
- Forward-Looking Statements: The filing includes standard disclaimers regarding uncertainties in charter rates, vessel values, bunker prices, and regulatory changes.
Investor Verification Checklist
- Verify the reconciliation of Non-GAAP measures (Adjusted EBITDA, Adjusted Net Income) to GAAP Net Income in Appendix B.
- Confirm the specific impact of the $5.5 million gain on derivative instruments on Q4 Net Income versus Adjusted Net Income.
- Review the details of the $1.02 billion revenue backlog, noting that $0.14 billion relates to variable hire rates with Yamal subject to operating cost adjustments.
- Assess the liquidity position given $48.0 million of debt repayable within one year against $97.0 million in total cash (of which $50.0 million is restricted).
- Monitor updates on Russian sanctions and their potential effect on the Partnership's counterparties and payment systems.