Business Context and Reporting Period
Dynagas LNG Partners LP (NYSE: DLNG) is a growth-oriented partnership owning and operating liquefied natural gas (LNG) carriers on multi-year charters. This Form 6-K, filed on November 9, 2015, reports unaudited financial results for the three and nine months ended September 30, 2015. The Partnership operates a fleet of five LNG carriers with an aggregate capacity of approximately 759,100 cubic meters.
Key Financial Metrics
| Metric | 3 Months Ended Sep 30, 2015 | 9 Months Ended Sep 30, 2015 |
|---|---|---|
| Voyage Revenues | $37.0 million | $108.2 million |
| Net Income | $16.0 million | $45.2 million |
| Adjusted EBITDA | $29.1 million | $84.7 million |
| Distributable Cash Flow | $18.9 million | $54.3 million |
| Adjusted EPS (Common Unit) | $0.41 | $1.25 |
| Cash and Cash Equivalents | $92.6 million | $92.6 million (as of Sep 30) |
| Total Indebtedness | $560.0 million (as of Sep 30) | |
| Total Available Liquidity | $136.6 million (as of Sep 30) |
Material Changes vs. Prior Period
- Revenue Growth: Voyage revenues increased 28.3% year-over-year for the nine-month period, driven by the full-year contribution of the Arctic Aurora and Yenisei River, acquired in 2014.
- Profitability: Net income rose 28.3% for the nine months ended September 30, 2015, compared to the same period in 2014. Adjusted EBITDA increased 51.1% over the same period.
- Operating Expenses: Vessel operating expenses increased by $5.9 million for the nine-month period due to the expanded fleet, though daily operating expenses per vessel remained relatively stable at $12,513.
- Interest Costs: Interest costs increased by $12.6 million for the nine-month period due to higher weighted average interest rates and outstanding indebtedness following the issuance of $250 million in Senior Unsecured Notes and a $340 million Senior Secured Credit Facility in 2014.
- Utilization: Fleet utilization remained at 100% for the three-month period and 99% for the nine-month period.
Guidance, Outlook, and Management Commentary
Management highlighted a strong financial quarter with 100% fleet utilization. The Partnership's fleet is fully contracted through the end of 2016 and 80% contracted through 2017. As of November 9, 2015, the contracted revenue backlog stood at approximately $565.8 million with an average remaining duration of 4.3 years.
Distributions: The Board declared a quarterly cash distribution of $0.4225 per common and subordinated unit for Q3 2015, payable November 12, 2015. Additionally, an initial distribution of $0.70 per unit was declared for Series A Preferred Units.
Future Growth: The Sponsor, Dynagas Holdings Ltd., contracted for five new 172,000 cubic meter ARC7 LNG carriers for the Yamal LNG Project. These vessels, along with four other "Optional Vessels," are potential future dropdown candidates for the Partnership, subject to Board discretion and conflict committee approval.
Risks: Forward-looking statements are subject to risks including fluctuations in charter rates, vessel values, bunker prices, drydocking costs, and geopolitical 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 of the $565.8 million revenue backlog and the specific terms of the Yamal LNG Project charters.
- Review the terms of the $340 million Senior Secured Credit Facility and the $250 million Senior Unsecured Notes regarding interest rate exposure.
- Assess the likelihood and timeline of the "dropdown" of the five Yamal Vessels and four Optional Vessels from the Sponsor.
- Monitor the impact of the $12.6 million increase in interest costs on future distributable cash flow.