Business Context and Reporting Period
Dynagas LNG Partners LP (NYSE: DLNG) is a master limited partnership owning and operating a fleet of six liquefied natural gas (LNG) carriers. This Form 6-K, filed on November 19, 2021, reports financial results for the three and nine months ended September 30, 2021. The Partnership operates under long-term time charters with major international energy producers.
Key Financial Metrics
| Metric | 3 Months Ended Sept 30, 2021 | 9 Months Ended Sept 30, 2021 |
|---|---|---|
| Voyage Revenues | $34.7 million | $102.1 million |
| Net Income | $11.3 million | $36.3 million |
| Adjusted Net Income | $11.6 million | $32.5 million |
| Adjusted EBITDA | $24.8 million | $72.3 million |
| Earnings Per Common Unit (GAAP) | $0.23 | $0.76 |
| Adjusted EPS (Non-GAAP) | $0.24 | $0.65 |
| Operating Cash Flow | $19.8 million | $58.6 million |
| Total Cash (including restricted) | $91.3 million | N/A |
| Outstanding Indebtedness | $579.0 million | N/A |
| Fleet Utilization | 100% | 100% |
Material Changes vs. Prior Period
- Net Income: Increased 13.0% to $11.3 million for the quarter compared to $10.0 million in the prior year period, driven by higher voyage revenues and reduced finance costs.
- Operating Expenses: Vessel operating expenses decreased to $7.0 million ($12,641 per vessel/day) from $7.2 million ($13,074 per vessel/day) in the prior year, attributed to lower technical maintenance costs.
- Finance Costs: Interest and finance costs decreased 11.7% to $5.3 million due to lower weighted average interest rates and reduced average interest-bearing debt.
- Cash Flow: Net cash from operating activities decreased 28.3% to $19.8 million from $27.6 million in the prior year, primarily due to working capital variations.
- Revenue: Voyage revenues remained relatively stable at $34.7 million compared to $34.3 million in the prior year quarter.
Outlook, Commentary, and Risks
Management Commentary: The CEO highlighted 100% fleet utilization for the sixth consecutive quarter. The fleet consists of six vessels with an average remaining contract term of 7.2 years. The Partnership maintains a strategy of using cash flow to deleverage the balance sheet and enhance liquidity.
Contract Backlog: As of November 18, 2021, the estimated contracted revenue backlog is $1.06 billion. Fleet coverage is estimated at 100% for 2021 and 2022, and 96% for 2023.
Distributions: The Partnership declared quarterly cash distributions of $0.5625 per Series A Preferred Unit and $0.546875 per Series B Preferred Unit for the period ending November 2021.
Risks and Contingencies: Forward-looking statements are subject to risks including global economic conditions, fluctuations in charter rates and vessel values, changes in LNG supply and demand, bunker price volatility, regulatory changes, and the potential impact of the discontinuance of LIBOR after 2021.
Investor Verification Checklist
- Verify the reconciliation of Non-GAAP measures (Adjusted EBITDA, Adjusted Net Income) to GAAP measures in Appendix B.
- Confirm the specific terms and remaining duration of the $675 million credit facility and the $30 million revolving credit facility.
- Review the impact of the interest rate swap transaction losses on future earnings volatility.
- Assess the composition of the $1.06 billion revenue backlog, noting that $0.15 billion relates to variable hire rates with Yamal subject to operating cost adjustments.
- Monitor the timeline for the earliest vessel re-delivery (Arctic Aurora in Q3 2023) and potential charter renewal risks.