Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Press Release)
Reporting Period: Three months and full year ended December 31, 2016
Business Overview: Owner and operator of six liquefied natural gas (LNG) carriers employed on fixed multi-year time charter contracts. The fleet operates at 100% utilization.
Key Financial Metrics
| Metric (in millions, except per unit) | Q4 2016 | Q4 2015 | Full Year 2016 | Full Year 2015 |
|---|---|---|---|---|
| Voyage Revenues | $41.4 | $37.0 | $169.9 | $145.2 |
| Net Income | $15.5 | $14.8 | $66.9 | $60.1 |
| Adjusted Net Income | $17.3 | $15.0 | $74.1 | $60.9 |
| Adjusted EBITDA | $33.9 | $28.5 | $139.5 | $113.2 |
| Distributable Cash Flow | $21.3 | $18.0 | $89.6 | $72.4 |
| Earnings per Common Unit | $0.39 | $0.37 | $1.69 | $1.60 |
| Adjusted EPS (Common) | $0.44 | $0.38 | $1.89 | $1.63 |
Liquidity and Debt (as of Dec 31, 2016):
- Cash and Cash Equivalents: $82.6 million (includes $25.0 million restricted).
- Available Liquidity: $112.6 million (includes $30.0 million revolving credit facility).
- Total Indebtedness: $722.5 million ($32.5 million current).
- Working Capital Surplus: $7.1 million.
Material Changes vs. Prior Period
- Revenue Growth: Full-year voyage revenues increased 17% to $169.9 million, driven by the acquisition of the Lena River in late 2015, which increased revenue-earning days.
- Profitability: Adjusted EBITDA for the full year increased 23% to $139.5 million. Q4 Adjusted EBITDA rose 19% year-over-year.
- Operational Efficiency: Fleet utilization reached 100% for both Q4 and the full year 2016. Average daily hire gross of commissions was approximately $78,250 per vessel in Q4 2016, slightly down from $78,900 in Q4 2015.
- Operating Expenses: Vessel operating expenses increased by $0.5 million in Q4 2016 compared to Q4 2015, exclusively due to the addition of the Lena River.
- Cash Flow: Net cash from operating activities decreased to $23.3 million in Q4 2016 from $28.7 million in Q4 2015, primarily due to negative working capital variations offsetting the cash contribution from the new vessel.
Guidance, Outlook, and Risks
Management Commentary: CEO Tony Lauritzen described 2016 as a "record financial year." The partnership intends to focus on obtaining additional contract coverage for 2017, managing operating expenses, and maintaining safe fleet operations.
Contract Backlog: As of February 27, 2017, the fleet is 86% contracted through 2017 and 75% contracted through 2018 and 2019. The estimated contracted revenue backlog is $1.56 billion with an average remaining contract duration of 10.7 years.
Distributions:
- Common/Subordinated Units: $0.4225 per unit for Q4 2016 (paid Jan 19, 2017).
- Series A Preferred Units: $0.5625 per unit (paid Feb 13, 2017).
Risks and Contingencies:
- Contract Conditions: Certain contracts with Yamal Trade Pte. are subject to conditions that, if not satisfied, could lead to cancellation or amendment.
- Market Risks: Fluctuations in charter rates, vessel values, bunker prices, and general market conditions.
- Operational Risks: Potential for vessel breakdowns, off-hires, dry-docking downtime, and political disruptions to shipping routes.
Investor Verification Checklist
- Contract Backlog Validity: Verify the status of conditions precedent for contracts with Yamal Trade Pte. and the risk of cancellation.
- Debt Maturity Profile: Review the schedule for the $32.5 million of debt repayable within one year and refinancing plans.
- Non-GAAP Reconciliations: Review Appendix B for the reconciliation of Adjusted EBITDA and Distributable Cash Flow to GAAP Net Income.
- Capital Expenditures: Assess the adequacy of maintenance and replacement capital expenditure reserves used in the Distributable Cash Flow calculation.
- Unit Conversion: Confirm the impact of the conversion of 14,985,000 subordinated units to common units on future earnings per unit calculations.