Business Context and Reporting Period
Company: Dynagas LNG Partners LP (NYSE: DLNG)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Three and nine months ended September 30, 2019
Filing Date: November 22, 2019
Business Overview: Owner and operator of six LNG carriers employed on multi-year charters. As of November 21, 2019, the fleet had 100% time charter coverage for 2019 and 2020, with an average remaining contract term of 8.9 years.
Key Financial Metrics
| Metric | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2019 |
|---|---|---|
| Voyage Revenues | $34.4 million | $96.6 million |
| Net (Loss) / Income | $(4.7) million | $(1.9) million |
| Adjusted Net Income | $2.8 million | $5.3 million |
| Adjusted EBITDA | $23.8 million | $66.4 million |
| Distributable Cash Flow | $7.0 million | $17.7 million |
| Operating Cash Flow | $13.6 million | $29.7 million |
| Total Cash & Restricted Cash | $317.6 million | $317.6 million |
| Available Liquidity | $47.6 million | $47.6 million |
| Total Debt (Gross) | $925.0 million | $925.0 million |
| Fleet Utilization | 99% | 98% |
Material Changes vs. Prior Period
- Net Loss Increase: Net loss for the quarter increased to $4.7 million from $0.7 million in Q3 2018. This was primarily driven by a $7.5 million one-time non-cash write-off due to the accelerated amortization of deferred loan fees from refinancing.
- Revenue Growth: Voyage revenues increased by $3.1 million (9.7%) quarter-over-quarter to $34.4 million, driven by higher rates on the Clean Energy and Yenisei River vessels, partially offset by lower rates on the Arctic Aurora.
- Operating Expenses: Vessel operating expenses rose to $7.5 million (daily rate of $13,531) from $6.4 million in the prior year quarter, attributed to increased crewing and technical expenditures.
- Interest Costs: Interest and finance costs surged to $21.4 million from $12.8 million, largely due to the $7.5 million loan fee write-off and higher weighted average interest rates.
- Adjusted Metrics: Adjusted Net Income decreased slightly by 15.2% to $2.8 million, and Distributable Cash Flow decreased by 6.7% to $7.0 million, mainly due to increased financing expenses.
Guidance, Outlook, and Management Commentary
- Debt Refinancing: On September 25, 2019, the Partnership closed a $675 million Senior Secured Term Loan (Credit Facility) to refinance existing debt. This reduced the interest margin by 33% compared to the previous facility.
- Distribution Suspension: Distributions on common units are suspended until the Credit Facility is repaid. Preferred unit distributions (Series A and B) continue as scheduled.
- Debt Repayment: The $250 million senior unsecured notes were fully repaid at maturity on October 30, 2019.
- Outlook: Management expects the new financial profile to deleverage debt over time, positioning the Partnership for future growth. The fleet is fully employed with the earliest re-chartering availability in Q3 2021.
- Risks: Forward-looking statements are subject to risks including global economic conditions, fluctuations in charter rates, bunker prices, regulatory changes, and vessel breakdowns.
Investor Verification Checklist
- Debt Structure: Verify the terms of the new $675 million Credit Facility, specifically the 14-year amortization profile and the requirement to maintain a $50 million restricted cash balance.
- Common Unit Distributions: Confirm the duration of the suspension on common unit distributions and the conditions required for resumption.
- Non-GAAP Reconciliations: Review Appendix B for the reconciliation of Adjusted EBITDA and Distributable Cash Flow to GAAP Net Income, noting the significant impact of the $7.5 million non-cash write-off.
- Liquidity Position: Assess the $47.6 million available liquidity against the $50 million minimum cash covenant and the $30 million revolving credit facility availability.
- Charter Backlog: Validate the $1.29 billion revenue backlog and the 8.9-year average remaining contract term to ensure long-term revenue stability.