Dynagas LNG Partners LP — FY2020 Form 20-F
Reporting period: Year ended December 31, 2020; filed April 29, 2021. This is an annual report, not a standalone Q4 report. Financial statements are audited and prepared under U.S. GAAP.
Business context
The Partnership owns and operates six LNG carriers, all employed under multi-year time charters. Its stated capital-allocation priority is repaying debt and strengthening the balance sheet; future growth depends on access to financing on acceptable terms. The 2020 fleet had 99.8% utilization and a reported average vessel age of 10.4 years at year-end.
Key financial metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Voyage revenue | $137.2 million | $130.9 million |
| Operating income | $64.3 million | $59.9 million |
| Net income | $34.1 million | $3.6 million |
| Common-unit earnings per unit | $0.63 | $(0.22) |
| Adjusted EBITDA | $96.5 million | $90.4 million |
| Operating cash flow | $68.6 million | $43.2 million |
| Cash and restricted cash | $75.0 million | $66.2 million |
| Gross long-term debt | $615.0 million | $663.0 million |
| Working capital | $(35.7) million | $(46.5) million |
| Fleet utilization | 99.8% | 98.5% |
| TCE rate per available day | $61,098 | $58,535 |
Operating margin was approximately 46.9% in 2020 versus 45.8% in 2019; net margin was approximately 24.8% versus 2.8%. These ratios are calculated from reported figures. Cash and restricted cash included $50.0 million held as restricted collateral, leaving $25.0 million of cash and cash equivalents. Current debt maturities were $48.0 million. The Partnership reported compliance with its credit-facility covenants at year-end.
Changes versus the prior year
- Revenue rose 4.8%; management attributed the increase mainly to a full year of the Lena River’s Yamal charter, which began in July 2019.
- Net income increased substantially, while interest and finance costs fell 53.8% to $27.1 million. Management cited a lower average debt interest rate (3.7% versus 5.4%) and prior-year refinancing-fee write-offs.
- Operating cash flow rose 58.8%. Financing cash outflow was $59.8 million, including $48.0 million of debt repayment and $11.6 million of preferred-unit distributions.
- Vessel operating expenses increased 1.4% to $28.8 million; daily operating expenses rose to $13,128 from $12,946.
- No common-unit distributions were paid in 2020. Common distributions had already been suspended after the 2019 credit facility prohibited them while borrowings remain outstanding. Series A and Series B preferred distributions continued.
Outlook, risks and unusual items
- Debt and liquidity: The $675 million senior secured facility matures in September 2024 and bears interest at LIBOR plus 3.00%. Its covenants include a $50 million restricted cash minimum, a leverage limit and a minimum cash-to-liabilities ratio. The Partnership says operating cash and expected sources should cover fleet operations, debt service and required preferred distributions for at least the next 12 months; however, the working-capital deficit and debt maturities remain important liquidity considerations.
- Interest-rate swap: In May 2020, the Partnership entered a swap covering the amortization schedule of 100% of facility debt, fixing three-month LIBOR at 0.41% through facility maturity. It did not qualify for hedge accounting; the Partnership recorded a $3.1 million loss and a $2.7 million fair-value liability at year-end.
- Charter concentration: 2020 revenue came from three charterers: Gazprom 45%, Yamal 39% and Equinor 16%. The six-vessel fleet and dependence on a small number of counterparties expose results to charterer performance, termination and renewal terms.
- Contract visibility: As of April 29, 2021, estimated contracted backlog was about $1.14 billion, including $0.15 billion of variable Yamal hire tied to operating costs; average remaining charter duration was about 7.8 years. Backlog excludes extension options and assumes full utilization, so actual revenue may differ.
- COVID-19 and market conditions: The filing reports logistical and crew-rotation challenges but no material adverse financial impact on 2020 results or financial position. Management and the filing identify continued pandemic effects, LNG demand and rates, energy prices, vessel values, and financing access as risks.
- Vessels and regulation: The next dry-dockings were expected to be longer and more costly, including ballast-water treatment installations; none were scheduled for 2021. Compliance with environmental and emissions rules may add operating and capital costs.
- Accounting estimate: A lower estimated vessel scrap value increased depreciation; management said the estimate change reduced 2020 net income by $1.4 million, or $0.04 per common unit. No vessel impairment was recorded, although the auditor identified vessel recoverability as a critical audit matter because forecast charter rates for uncontracted days require judgment.
- Litigation: A securities class action’s Exchange Act claims were dismissed, while Securities Act claims remained. The parties reached an agreement in principle to settle, subject to documentation and court approval; the filing says the settlement is expected to be fully covered by D&O insurance.
- Subsequent developments: A March 2021 related-party management agreement reduced technical management fees from $3,167 to $2,750 per vessel per day, effective January 1, 2021. After year-end, the Partnership sold $3.5 million of common units under its ATM program at an average $2.9153 per unit; $26.5 million of program capacity remained. Equinor also agreed to a new Arctic Aurora charter for two years plus 45 days, expected to start in September 2021.
- Forecasts: The filing provides no specific financial guidance or earnings forecast.
Important facts for investors to verify
- Facility covenant headroom, restricted-cash requirements and the $48 million annual principal installments through 2023, followed by the $471 million 2024 balloon payment.
- Whether charterers meet obligations and whether the reported backlog, especially variable Yamal hire, converts to expected cash revenue.
- Preferred-unit distribution coverage and the continued prohibition on common-unit distributions while facility borrowings remain outstanding.
- Subsequent ATM issuance, potential dilution, and the Sponsor ownership/change-of-control conditions in the credit facility.
- Status and final terms of the class-action settlement and confirmation of insurance coverage.
- Future vessel values, impairment assumptions, dry-docking and ballast-water compliance costs, and the swap’s fair-value and cash-settlement effects.