Business Context and Reporting Period
Dynagas LNG Partners LP (NYSE: DLNG) is a master limited partnership owning and operating six LNG carriers under long-term charters. This Form 6-K, filed on December 13, 2022, incorporates a press release reporting financial results for the three and nine months ended September 30, 2022. The fleet operates with an average remaining contract term of 6.2 years and maintained 100% utilization for the tenth consecutive quarter.
Key Financial Metrics
| Metric | 3 Months Ended Sept 30, 2022 | 9 Months Ended Sept 30, 2022 |
|---|---|---|
| Voyage Revenues | $29.9 million | $96.6 million |
| Net Income | $7.4 million | $42.4 million |
| Adjusted Net Income | $4.5 million | $23.6 million |
| Adjusted EBITDA | $20.0 million | $65.9 million |
| Earnings Per Common Unit (Basic/Diluted) | $0.12 | $0.92 |
| Adjusted Earnings Per Common Unit | $0.04 | $0.41 |
| Operating Cash Flow | $10.9 million | $43.9 million |
| Total Cash and Restricted Cash | $97.7 million | $97.7 million |
| Outstanding Indebtedness | $531.0 million | $531.0 million |
Liquidity: As of September 30, 2022, the Partnership held $97.7 million in total cash (including $50.0 million restricted). It had $30.0 million of unused availability under a revolving credit facility with its Sponsor.
Material Changes Versus Prior Period
- Revenue Decline: Voyage revenues decreased 13.8% to $29.9 million for the quarter compared to $34.7 million in Q3 2021. This was primarily due to reduced revenue-earning days caused by scheduled dry-docking of the Amur River and OB River.
- Net Income Decrease: Net income fell 35.0% to $7.4 million from $11.3 million in the prior year quarter. Contributing factors included lower revenues, increased dry-docking costs ($7.4 million in Q3 2022 vs. none in Q3 2021), and higher interest and finance costs.
- Interest Costs: Net interest and finance costs rose 40% to $7.4 million, driven by an increase in the weighted average interest rate, partially offset by a reduction in interest-bearing debt.
- Derivative Gains: The Partnership recorded a realized gain of $2.5 million on interest rate swap transactions in Q3 2022, compared to a loss of $0.4 million in the same period of 2021.
Outlook, Risks, and Management Commentary
Outlook and Backlog: Management remains optimistic about long-term LNG shipping demand. As of December 12, 2022, the estimated contracted revenue backlog was $0.91 billion. Fleet coverage is estimated at 100% for 2022, 96% for 2023, and 83% for 2024.
Subsequent Events: On October 12, 2022, the Partnership voluntarily prepaid $18.73 million on its $675 million Credit Facility to remove the participation of Amsterdam Trade Bank (ATB), which was designated as a Specially Designated National by the U.S. Office of Foreign Assets Control. Cash collateral was released to fund this prepayment.
Risks and Contingencies:
- Sanctions: The Partnership monitors U.S. and E.U. sanctions related to the conflict in Ukraine. While current regimes do not materially affect operations, and counterparties are performing obligations, the full impact of future sanctions or escalation remains uncertain.
- Charter Control: Charters for the Amur River, OB River, and Clean Energy are under the control of the German government following the takeover of Gazprom Germania and SEFE GmbH.
- Forward-Looking Statements: Risks include fluctuations in charter rates, bunker prices, vessel values, and potential disruptions to shipping routes or payment systems (e.g., SWIFT).
Investor Verification Checklist
- Verify the impact of the $18.73 million voluntary prepayment on the $675 million Credit Facility and the release of cash collateral.
- Confirm the status of counterparties (Gazprom Marketing and Trading, SEFE) under evolving U.S. and E.U. sanctions regimes.
- Review the reconciliation of Non-GAAP measures (Adjusted EBITDA, Adjusted Net Income) to GAAP measures in Appendix B of the source filing.
- Monitor the scheduled re-delivery dates, specifically the Arctic Aurora (Q3 2023) and Clean Energy (Q1 2026).
- Assess the effect of rising interest rates on future debt service costs given the increase in weighted average interest rates.