Dynagas LNG Partners LP — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 filing; separate Q4 results are not provided in the supplied filing text. Financial statements are prepared under U.S. GAAP.
Business context
The Partnership owns and operates six LNG carriers, all employed on multi-year time charters. Average fleet age was 13.4 years at year-end, and average remaining charter duration was approximately 7.1 years at December 31 (the filing also gives 6.8 years as of the report date). Estimated contracted revenue backlog was approximately $1.10 billion, including $0.12 billion of variable hire, and excludes extension options. Revenue came from three charterers: Yamal, SEFE and Equinor.
Financial and operating performance
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Voyage revenues | $148.9 million | $131.7 million | Up 13.1%; the filing separately reports $11.6 million of contract revenue in 2023, versus none in 2022. |
| Operating income | $64.7 million | $45.3 million | Up $19.4 million. |
| Net income | $35.9 million | $54.0 million | Down $18.1 million; the prior-year result included a much larger derivative gain. |
| Basic and diluted earnings per common unit | $0.66 | $1.15 | Down from the prior year. |
| Interest and finance costs | $39.2 million | $27.9 million | Up 40.5%; weighted-average debt interest rate rose to 8.07% from 4.65%. |
| Net cash from operating activities | $64.4 million | $57.3 million | Up $7.1 million, primarily due to favorable working-capital movements. |
| Net cash used in investing activities | $4.2 million | $3.6 million | Primarily ballast-water treatment system installations. |
| Net cash used in financing activities | $66.3 million | $70.8 million | Included debt repayments and preferred-unit distributions. |
| Cash and cash equivalents | $73.8 million | $48.6 million | Year-end 2022 also had $31.3 million of restricted cash; combined cash and restricted cash declined to $73.8 million from $79.9 million. |
| Debt outstanding | $420.6 million | $499.9 million | All reported as current at year-end 2023 due to September 2024 maturity. |
| Working capital | Deficit of $353.5 million | Surplus of $4.0 million | Primarily reflects the debt maturity within one year. |
Operating expenses included $34.4 million of vessel operating costs and $17.7 million of dry-docking and special-survey costs. Three vessels completed scheduled dry-docks in 2023. Management fees to the affiliated Manager were $6.4 million; total commercial and technical management expense was approximately $8.2 million. No vessel impairment was recorded.
Material changes and unusual items
- Operating income increased despite higher vessel operating and dry-docking costs. The filing attributes higher revenue mainly to improved hire on Arctic Aurora and increased variable hire on the Yamal-chartered vessels.
- Net income declined as interest costs rose and the derivative gain fell to $5.3 million from $33.7 million in 2022. The swap’s fair value was a $15.6 million asset at year-end, compared with $34.9 million a year earlier.
- A $2.9 million insurance recovery related to prior damage to Clean Energy was recognized as other income in 2023. The Partnership received $2.8 million net in April 2024.
- The Partnership voluntarily prepaid $31.3 million of debt in March 2023, applying it against the balloon payment. The $30 million interest-free Sponsor revolver expired in November 2023 and was not renewed.
Liquidity, debt and distributions
The $675 million senior secured facility had $420.6 million outstanding at December 31, 2023, secured by mortgages on all six vessels. The facility prohibits common-unit distributions while borrowings remain outstanding; common distributions have been suspended since May 2019. Preferred distributions may be restricted if an event of default occurs. The Partnership paid $11.6 million of preferred distributions in 2023 and reported no defaults or arrearages.
The Series A preferred units carry a 9.00% cumulative rate. Series B’s rate changed from fixed 8.75% to floating in November 2023, based on three-month Term SOFR plus the stated spread. Management expects to repay or refinance the debt using a sale-and-leaseback financing term sheet with China Development Bank Financial Leasing for up to $345 million, together with other liquidity sources. The proposed financing covers four vessels, requires repurchase of those vessels at the end of the lease term, and remained subject to definitive documents and customary closing conditions; closing was expected in Q2 2024. Management stated it believed refinancing was probable and that available resources would support operations and obligations for at least twelve months. The filing’s debt-maturity descriptions are not fully consistent: it cites a $396.6 million final installment and balloon in one section, a $384.6 million balloon in another, and $420.6 million total debt due in 2024 in the financial-statement note.
Outlook, commentary and principal risks
Management’s stated priority is debt repayment and balance-sheet strength; future growth depends on access to debt or equity capital on acceptable terms. No specific earnings or revenue guidance is provided. All six vessels are on multi-year charters, but future results remain exposed to refinancing, charterer performance, vessel off-hire, operating costs and market conditions.
- Charterer and geopolitical concentration: Yamal represented 43% of 2023 revenue, SEFE 41% and Equinor 16%. Yamal’s Russia-related exposure creates sanctions and potential charter-disruption risk. The Partnership reported that sanctions in force had not prohibited its LNG shipping or adversely affected its charters as of the report date.
- Refinancing and covenant risk: The 2024 debt maturity, high interest costs and secured-vessel collateral make completion and terms of the proposed refinancing material. The Partnership reported compliance with facility covenants at year-end.
- Small fleet: With only six vessels, extended off-hire, damage, dry-docking overruns or charter termination could materially affect cash flow.
- Market and regulatory risks: LNG shipping rates, vessel values, interest rates, fuel and crew costs, environmental rules and decarbonization requirements may affect profitability and access to capital.
- Governance and related parties: The Sponsor owns approximately 42.4% of common units, and an affiliated Manager provides vessel, executive and administrative services for fees. The filing describes potential conflicts and limits on unitholder rights.
Important facts for investors to verify
- Whether the proposed sale-and-leaseback closed, its final proceeds, pricing, covenants and repurchase obligations, and whether the 2024 facility was fully repaid or refinanced.
- The exact debt payoff and balloon amounts: the filing presents different figures across sections.
- Whether Yamal-related sanctions, charter terms or payments have changed, and the status and credit quality of each major charterer.
- Subsequent operating performance, cash generation, debt service and compliance with liquidity and leverage covenants.
- Preferred distribution coverage and the floating Series B distribution rate; common-unit distributions remain blocked while facility borrowings are outstanding.
- Assumptions used in the vessel impairment analysis. The auditor identified impairment testing, particularly future charter rates for uncontracted days, as a critical audit matter; no impairment was recorded.
Other filing points: The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting; the filing did not include an auditor attestation on internal controls because the Partnership is a non-accelerated filer.