Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Press Release)
Reporting Period: Three months ended March 31, 2015
Business Overview: Dynagas is a growth-oriented partnership owning and operating LNG carriers on multi-year charters. As of the reporting date, the fleet consisted of five LNG carriers with an aggregate capacity of approximately 759,100 cubic meters.
Key Financial Metrics
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Voyage Revenues | $35.6 million | $21.0 million |
| Net Income | $14.9 million | $11.0 million |
| Adjusted Net Income (Non-GAAP) | $15.2 million | $11.2 million |
| Adjusted EBITDA (Non-GAAP) | $28.1 million | $16.5 million |
| Distributable Cash Flow (Non-GAAP) | $18.0 million | $12.3 million |
| Adjusted EPS (Non-GAAP) | $0.43 | $0.37 |
| Net Cash from Operating Activities | $26.4 million | $14.5 million |
Liquidity and Debt:
- Cash and Cash Equivalents: $18.2 million (Balance Sheet); Total cash including restricted cash was $42.2 million.
- Total Indebtedness: $570.0 million.
- Available Liquidity: $72.2 million (comprised of $42.2 million cash and $30.0 million borrowing capacity).
- Weighted Average Interest Rate: Approximately 3.1% on the senior secured revolving credit facility.
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 69.5% to $35.6 million, driven by the acquisition of two additional LNG carriers (Arctic Aurora and Yenisei River) in 2014, expanding the fleet from three to five vessels.
- Profitability: Net income rose 34.9% to $14.9 million. Adjusted EBITDA surged 70.3% to $28.1 million.
- Operating Expenses: Vessel operating expenses increased by $2.4 million to $5.5 million, primarily due to the operation of the two new vessels. Daily operating expenses per vessel rose slightly to $12,202 from $11,570.
- Interest Costs: Interest and finance costs increased by $4.8 million due to higher weighted average interest rates and increased outstanding indebtedness.
- Utilization: Fleet utilization remained at 100% for both periods.
Guidance, Outlook, and Management Commentary
Management Commentary: Management attributed improved results to fleet expansion and 100% fleet utilization. The partnership emphasized a focus on safety, operational efficiency, and further fleet growth.
Contract Coverage:
- 100% of the fleet is contracted through the end of 2016.
- 80% of the fleet is contracted through 2017.
- Contracted revenue backlog stands at approximately $637.1 million with an average remaining duration of 4.8 years.
Growth Opportunities: The partnership holds the right to acquire five additional "Optional Vessels" currently owned by its Sponsor.
Distributions: A quarterly cash distribution of $0.4225 per unit was declared for Q1 2015 and paid on May 12, 2015. This represents a 16% increase in cash distribution per unit since the IPO in November 2013.
Risks: Forward-looking statements are subject to uncertainties including global economic conditions, fluctuations in charter rates and vessel values, changes in LNG demand, bunker prices, drydocking costs, and potential disruptions to shipping routes.
Investor Verification Checklist
- Verify the reconciliation of Non-GAAP measures (Adjusted EBITDA, Distributable Cash Flow) to GAAP Net Income in Appendix B.
- Confirm the status and terms of the "Optional Vessels" acquisition rights for future growth projections.
- Review the specific terms of the time charter contracts covering 2016 and 2017 to assess revenue stability.
- Monitor the weighted average interest rate on the $320 million revolving credit facility and potential refinancing needs.
- Assess the impact of increasing daily operating expenses ($12,202 vs $11,570) on future margins.