Business Context and Reporting Period
Dynagas LNG Partners LP (Dynagas Partners) is a growth-oriented partnership owning and operating liquefied natural gas (LNG) carriers on multi-year charters. This Form 6-K, filed on November 12, 2014, reports unaudited financial results for the three and nine months ended September 30, 2014. As of November 10, 2014, the fleet consisted of five LNG carriers with an aggregate capacity of 759,100 cubic meters.
Key Financial Metrics
| Metric | 3 Months Ended Sept 30, 2014 | 9 Months Ended Sept 30, 2014 |
|---|---|---|
| Voyage Revenues | $28.8 million | $70.7 million |
| Net Income | $14.0 million | $35.2 million |
| Adjusted Net Income (Non-GAAP) | $14.3 million | $37.0 million |
| Adjusted EBITDA (Non-GAAP) | $22.6 million | $56.1 million |
| Distributable Cash Flow (Non-GAAP) | $16.3 million | $41.2 million |
| Adjusted EPS (Common Unit) | $0.40 | $1.20 |
| Cash and Cash Equivalents (Sept 30, 2014) | $11.1 million | |
| Total Indebtedness (Sept 30, 2014) | $580.0 million | |
| Total Available Liquidity (Sept 30, 2014) | $65.1 million |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 33.8% for the quarter and 10.5% for the nine-month period compared to 2013, driven by the addition of the Arctic Aurora (June 2014) and Yenisei River (September 2014).
- Profitability: Net income rose 17.8% for the quarter and 1.8% for the nine-month period. Adjusted Net Income increased 37.7% (quarter) and 22.1% (nine months).
- Operating Expenses: Vessel operating expenses increased 64.1% for the quarter and 23.9% for the nine months due to the expanded fleet and higher crew costs. Daily operating expenses per vessel rose to $12,414 (quarter) and $12,138 (nine months) from $10,254 and $11,065 in 2013, respectively.
- Utilization: Fleet utilization remained at 100% for both periods in 2014 and 2013.
- Debt: Total indebtedness increased significantly due to the acquisition of the Yenisei River and the issuance of $250 million in senior unsecured notes.
Guidance, Outlook, and Management Commentary
- Recent Developments: The Partnership completed a $250 million senior unsecured notes offering (6.25% interest, due 2019) in September 2014 to fund the acquisition of the Yenisei River for $257.5 million.
- Distributions: A quarterly cash distribution of $0.39 per unit was declared for Q3 2014, payable November 12, 2014. Management intends to recommend an increase to between $0.42 and $0.425 per unit for the quarter ending December 31, 2014, subject to Board approval.
- Outlook: The fleet is fully contracted through 2016, with 80% coverage for 2017. The contracted revenue backlog as of November 10, 2014, was approximately $710.8 million with an average remaining duration of 5.3 years.
- Strategy: Management focuses on operational efficiency and growth, noting a 69% increase in fleet capacity in 2014. The Sponsor holds five additional "Optional Vessels" as a source for future growth.
- Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, drydocking costs, and geopolitical disruptions.
Investor Verification Checklist
- Verify the Board's approval of the proposed Q4 2014 distribution increase to $0.42–$0.425 per unit.
- Confirm the operational status and charter terms of the newly acquired Yenisei River.
- Review the reconciliation of Non-GAAP measures (Adjusted Net Income, Adjusted EBITDA, Distributable Cash Flow) to GAAP Net Income in Appendix B.
- Monitor the weighted average interest rate on the $330 million senior secured revolving credit facility and the new $250 million notes.
- Assess the impact of rising daily operating expenses ($12,414/vessel) on future margins if charter rates decline.