Dynagas posts higher net profit in the third quarter

dynagas

Dynagas LNG Partners LP (NYSE: DLNG) (“Dynagas Partners” or the “Partnership”), an owner and operator of LNG carriers, announced its results (unaudited) for the three and nine months ended September 30, 2015.

Three and Nine Months Ended September 30, 2015 Highlights:

(1)Adjusted Net Income, Distributable Cash Flow, Adjusted EBITDA, and Adjusted Earnings per common unit are not recognized measures under U.S. GAAP. Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Recent Developments:

Quarterly Common and Subordinated Unit Cash Distribution: On October 23, 2015, the Partnership announced that its Board of Directors (the “Board”) declared a quarterly cash distribution of $0.4225 per common and subordinated unit for the third quarter of 2015. This cash distribution is payable on or about November 12, 2015 to all unitholders of record as of November 5, 2015.

Series A Cumulative Redeemable Preferred Units Cash Distribution: On October 23, 2015, the Partnership also announced that the Board declared a cash distribution of $0.70 per unit of its Series A Cumulative Redeemable Perpetual Preferred Units (the “Series A Preferred Units”) (NYSE: DLNG PR A) for the period from July 20, 2015 to November 12, 2015. This cash distribution is payable on or about November 12, 2015 to all Series A Preferred unitholders of record as of November 5, 2015. This is the initial distribution on the Series A Preferred Units.

Management Commentary:

Tony Lauritzen, Chief Executive Officer of the Partnership, commented:

“We are pleased to report our earnings for the three and nine months ended September 30, 2015. The results show a significant improvement compared to the same period in 2014. Consistent with our objectives, we have been and continue to be focused on the performance of our fleet from a safety, operational and technical point of view. During this quarter, we again achieved 100% fleet utilization, which positively affected our financial results for the period, which we believe is reflective of the quality of our fleet and our Manager’s operational ability.

During 2014, we increased the size of our fleet by approximately 69% on a cubic meter capacity basis, which enabled us to increase cash distributions to our unitholders. On October 23, 2015, we announced a cash distribution of $0.4225 per common and subordinated unit for the third quarter of 2015, which is expected to be paid on or about November 12, 2015, to all common and subordinated unitholders of record of November 5, 2015. Since our IPO in November 2013, we have paid total cash distributions of $2.5621 per common and subordinated unit (amount does not include the abovementioned declared cash distribution for the third quarter of 2015). In addition, on October 23, 2015, we also announced a cash distribution of $0.70 per unit on our Series A Preferred Units for the period from July 20, 2015 to November 12, 2015, which is expected to be paid on or about November 12, 2015 to all Series A Preferred unitholders of record as of November 5, 2015. This is the initial distribution on the Series A Preferred Units.

The three months ended September 30, 2015 has been another strong financial quarter for us. In addition, in August 2015, our Sponsor, Dynagas Holdings Ltd., entered into contracts for the construction of five 172,000 cubic meter ARC7 LNG carriers at Daewoo Shipbuilding & Marine Engineering Co. Ltd. shipyard in South Korea. The five newbuildings, upon their delivery to our Sponsor, are contracted to be employed under long term charters to the Yamal LNG Project, an Arctic LNG project that requires ice class designated vessels. We refer to these five newbuilding vessels as the Yamal Vessels. We believe the Yamal Vessels may be future dropdown candidates for the Partnership in addition to five other vessels owned by our Sponsor, in which we have options to purchase pursuant to the omnibus agreement (the “Optional Vessels”). Four out of the five Optional Vessels owned by our Sponsor are also contracted to be employed under long term charters for the Yamal LNG Project. We have no ownership interest in the Yamal Vessels or the Optional Vessels. The future dropdown of any of the Yamal Vessels or the Optional Vessels will be at the discretion of our Board of Directors and subject to, among other terms and conditions, the negotiation and execution of important documentation and the approval of our conflicts committee.

With our fleet fully contracted through 2016 and 80% contracted through 2017, we intend to continue to focus our attention on increasing contract coverage, further fleet growth and safe and efficient operations. I look forward to working with our team towards meeting our goals, which we believe will benefit our unitholders.”

Financial Results Overview:

For the results and the selected financial data for the nine months ended September 30, 2015 and 2014, presented herein, the Partnership has compiled consolidated statements of income w hich were derived from the unaudited interim condensed consolidated financial statements for the periods presented.

Three Months Ended September 30, 2015 and 2014 Financial Results

The Partnership reported net income of $16.0 million for the three months ended September 30, 2015, compared to $14.0 million in the corresponding period of 2014, which represents an increase of $2.0 million, or 14.6%. Excluding the non-cash items presented in Appendix B, Adjusted Net Income for the three months ended September 30, 2015 was $16.0 million, compared to Adjusted Net Income of $14.3 million in the corresponding period in 2014, which represents an increase of $1.7 million, or 11.8%.

Adjusted EBITDA (which is non-GAAP measure used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s operating performance) for the three months ended September 30, 2015, was $29.1 million, compared to $22.6 million in the corresponding period of 2014, which represents an increase of $6.5 million, or 28.7%.

The Partnership’s Distributable Cash Flow for the three-month period ended September 30, 2015 was $18.9 million, compared to $16.3 million in the corresponding period of 2014, which represents an increase of $2.6 million, or 15.8%. Distributable Cash Flow is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions. Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

For the three-month period ended September 30, 2015, the Partnership reported adjusted Earnings per common basic and diluted unit of $0.41. Adjusted Earnings per common unit is a non-GAAP financial measure and is calculated on the basis of a weighted number of 20,505,000 basic and diluted common units outstanding during the period, after reflecting the impact of the non-cash items presented in Appendix B.

Voyage revenues increased to $37.0 million for the three-month period ended September 30, 2015, compared to $28.8 million for the same period in 2014.This increase primarily reflects the Partnership’s ownership and operation of the Yenisei River, the second LNG carrier that the Partnership acquired from its Sponsor on September 25, 2014, for a full quarter, and increased revenues relating to the employment of the Amur River under a new 13-year time charter with improved terms. As a result of the growth in the Partnership’s fleet, Available Days increased to 460.0 days during the three-month period ended September 30, 2015, compared to 373.5 days during the corresponding period of 2014.

Vessel operating expenses increased by $1.0 million to $5.6 million in the three-month period ended September 30, 2015, from $4.6 million for the same period in 2014, mainly due to the ownership of the Yenisei River. This increase in operating expenses was partially offset by a decrease in other operational costs. Daily operating expenses were $12,187 per LNG carrier during the three months ended September 30, 2015, compared to $12,414 per LNG carrier in the corresponding period of 2014.

The Partnership’s overall financial performance during the periods discussed also reflects an increase in the weighted average interest rate as well as an increase in the weighted average outstanding indebtedness (directly attributed to the issuance of the Partnership’s $250 million Senior Unsecured Notes in September 2014) in the three months ended September 30, 2015, as compared to the corresponding period of 2014, resulting in an increase of approximately $3.1 million in the Partnership’s interest costs.

The Partnership reported average daily hire gross of commissions on a cash basis (1) of approximately $80,400 per day per vessel in the three months ended September 30, 2015, compared to approximately $78,250 in the same period of 2014. During both of the three month periods ended September 30, 2015 and 2014, the Partnership’s vessels operated at 100% utilization.

(1) Average daily hire gross of commissions on a cash basis represents voyage revenue on a cash basis, without taking into consideration the non-cash time charter amortization expense, divided by the Available Days in the Partnership’s fleet as described in Appendix B.

Amounts relating to variations in period-on-period comparisons shown in this section are derived from the condensed financials presented below.

Nine Months Ended September 30, 2015 and 2014 Financial Results

The Partnership reported net income of $45.2 million for the nine months ended September 30, 2015, compared to $35.2 million in the corresponding period of 2014, which represents an increase of $10.0 million, or 28.3%. Excluding the non-cash items presented in Appendix B, Adjusted Net Income for the nine months ended September 30, 2015, was $45.8 million, compared to Adjusted Net Income of $37.0 million in the corresponding period in 2014, which represents an increase of $8.9 million, or 24.0%.

Adjusted EBITDA (which is non-GAAP measure used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s operating performance) for the nine months ended September 30, 2015 was $84.7 million, compared to $56.1 million in the corresponding period of 2014, which represents an increase of $28.6 million, or 51.1%.

The Partnership’s Distributable Cash Flow for the nine-month period ended September 30, 2015 was $54.3 million, compared to $41.2 million in the corresponding period of 2014, which represents an increase of $13.1 million, or 31.8%. Distributable Cash Flow is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions. Please refer to the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

For the nine-month period ended September 30, 2015, the Partnership reported Adjusted Earnings per common basic and diluted unit of $1.25. Adjusted Earnings per common unit is a non-GAAP financial measure and is calculated on the basis of a weighted number of 20,505,000 basic and diluted common units outstanding during the period, after reflecting the impact of the non-cash items presented in Appendix B.

Voyage revenues increased to $108.2 million during the nine months ended September 30, 2015, compared to $70.7 million for the same period in 2014. This increase was the result of the expansion of the Partnership’s fleet with the two LNG carriers, the Arctic Aurora and the Yenisei River that the Partnership acquired from its Sponsor on June 23, 2014 and September 25, 2014, respectively. As a result of this growth in the Partnership’s fleet, Available Days increased to 1,365.0 days during the nine-month period ended September 30, 2015, compared to 924.0 days during the corresponding period of 2014.

Vessel operating expenses increased by $5.9 million to $17.1 million in the nine-month period ended September 30, 2015, from $11.2 million for the same period in 2014. Operation of the Arctic Aurora and Yenisei River accounted for $5.4 million of this increase and the remainder of the increase was due to slightly increased operational costs. Daily operating expenses were $12,513 per LNG carrier during the nine months ended September 30, 2015, compared to $12,138 per LNG carrier in the corresponding period of 2014.

The Partnership’s overall financial performance during the periods presented also reflects an increase of $12.6 million in the Partnership’s interest costs as a result of the increase in both the weighted average interest rate and weighted average outstanding indebtedness in the nine months ended September 30, 2015, as compared to the corresponding period of 2014. The increase was attributable to the issuance of the Partnership’s $250 million Senior Unsecured Notes in September 2014 and the $340 Million Senior Secured Credit Facility that the Partnership entered into in June 2014.

The Partnership reported average daily hire gross of commissions on a cash basis (2) of approximately $79,000 per day per vessel in the nine months ended September 30, 2015, (or $79,650 per day per vessel in the nine months ended September 30, 2015 if ballast revenues are taken into account), compared to approximately $78,300 in the same period of 2014. During each of the nine month periods ended September 30, 2015 and 2014, all of the Partnership’s vessels operated at 99% (3) and 100% utilization, respectively.

(2)Average daily hire gross of commissions on a cash basis represents voyage revenue on a cash basis, without taking into consideration the non-cash time charter amortization expense, divided by the Available Days in the Partnership’s fleet as described in Appendix B.

(3) Current nine month period utilization does not reflect idle period on one of the Partnership’s fleet vessels, during part of which the Partnership received ballast bonus revenues and early redelivery compensation of approximately $0.9 million.

Amounts relating to variations in period-on-period comparisons shown in this section are derived from the condensed financials presented below.

Liquidity / Cash Flow update

As of September 30, 2015, the Partnership reported cash of $116.6 million (including minimum cash liquidity requirements imposed by the Partnership’s lenders). Total indebtedness as of September 30, 2015 was $560.0 million. The weighted average interest rate accruing on the Partnership’s $340 Million Senior Secured Credit Facility (under which the Partnership has outstanding borrowings of $310.0 million) for the three and nine months ended September 30, 2015, was approximately 3.1% and 3.2%, respectively.

During the nine months ended September 30, 2015, the Partnership generated net cash from operating activities of $68.2 million, compared to $55.8 million in the same period in 2014, which was exclusively due to the net cash flows during the current nine month period from the operation of the Arctic Aurora and the Yenisei River, which were acquired from its Sponsor in the second quarter and the third quarter of 2014, respectively. This increase was partially offset by the effect of other operating assets and liabilities variations between the compared periods.

As of September 30, 2015, the Partnership had total available liquidity of $136.6 million (comprised of $116.6 million in cash and $30.0 million of borrowing capacity under the Partnership’s revolving credit facility with its Sponsor).

Time Charter Coverage

As of November 9, 2015, the Partnership had contracted employment for 100% of its total fleet Calendar Days through the end of 2016 and 80% of its fleet Calendar Days for 2017. Time charter coverage with regards to total fleet Calendar Days is calculated on the basis of the earliest estimated redelivery dates provided in the Partnership’s current time charter contracts.

As of November 9, 2015, the Partnership’s contracted revenue backlog (4) was approximately $565.8 million with average remaining contract duration of 4.3 years.

(4) The Partnership calculates its contracted revenue backlog by multiplying the contractual daily hire rate by the minimum expected number of days committed under the contracts (excluding options to extend), assuming full utilization. The actual amount of revenues earned and the actual periods during which revenues are earned may differ from the amounts and periods shown in the table below due to, for example, shipyard and maintenance projects, downtime and other factors that result in lower revenues than the Partnership’s average contract backlog per day.

Conference Call and Webcast: November 9, 2015

As announced, the Partnership’s management team will host a conference call on Monday, November 9, 2015 at 10:00 a.m. Eastern Time to discuss the Partnership’s financial results.

Conference Call details: Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or (+44) (0) 1452 542 301 (Standard International Dial In). Please quote “Dynagas.”

A telephonic replay of the conference call will be available until Monday, November 16, 2015. The United States replay number is 1 (866) 247-4222; from the UK 0 (800) 953-1533; the standard international replay number is (+44) (0) 1452 550 000 and the access code required for the replay is: 59711562#.

Audio Webcast – Slides Presentation: There will be a live and then archived audio webcast of the conference call, via the internet through the Dynagas LNG Partners website www.dynagaspartners.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

The slide presentation on the third quarter and nine months ended September 30, 2015 financial results will be available in PDF format 10 minutes prior to the conference call and webcast, accessible on the company’s website www.dynagaspartners.com on the webcast page. Participants to the webcast can download the PDF presentation.

About Dynagas LNG Partners LP Dynagas LNG Partners LP. (NYSE: DLNG) is a growth-oriented partnership formed by Dynagas Holding Ltd. to own, and operate liquefied natural gas (LNG) carriers employed on multi-year charters. The current fleet of Dynagas Partners consists of five LNG carriers, with an aggregate carrying capacity of approximately 759,100 cubic meters.

Visit the Partnership’s website at www.dynagaspartners.com

Forward-Looking Statement

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The Partnership desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “expected”, “pending” and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, examination by the Partnership’s management of historical operating trends, data contained in its records and other data available from third parties. Although the Partnership believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Partnership’s control, the Partnership cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that, in the Partnership’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for Liquefied Natural Gas (LNG) shipping capacity, changes in the Partnership’s operating expenses, including bunker prices, drydocking and insurance costs, the market for the Partnership’s vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessel breakdowns and instances of off-hires and other factors. Please see the Partnership’s filings with the Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties. The information set forth herein speaks only as of the date hereof, and the Partnership disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.

Reconciliation of U.S. GAAP Financial Information to Non-GAAP Financial Information Reconciliation of Net Income to Adjusted EBITDA

The Partnership defines Adjusted EBITDA as earnings before interest and finance costs, net of interest income (if any), gains/losses on derivative financial instruments (if any), taxes (when incurred), depreciation and amortization (when incurred) and significant non-recurring items (if any). Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess the Partnership’s operating performance.

The Partnership believes that Adjusted EBITDA assists its management and investors by providing useful information that increases the comparability of the Partnership’s performance operating from period to period and against the operating performance of other companies in its industry that provide Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. The Partnership believes that including Adjusted EBITDA as a measure of operating performance benefits investors in (a) selecting between investing in the Partnership and other investment alternatives and (b) monitoring the Partnership’s ongoing financial and operational strength in assessing whether to continue to hold common units.

Adjusted EBITDA is not a measure of financial performance under U.S. GAAP, does not represent and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income and these measures may vary among other companies. Therefore, Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies.

Reconciliation of Net Income to Adjusted Net Income available to common unitholders and Adjusted Earnings per common unit

Adjusted Net Income represents net income before non-recurring expense resulting from accelerated time charter amortization and charter hire amortization related to time charters with escalating time charter rates, both of which are significant non-cash items. Adjusted Net Income available to common unitholders represents the common unitholders interest in Adjusted Net Income for each period presented. Adjusted Earnings per common unit represents Adjusted Net Income attributable to common unitholders divided by the weighted average common units outstanding during each period presented.

Adjusted Net Income, Adjusted Net Income per common unit and Adjusted Earnings per common unit, basic and diluted, are not recognized measures under U.S. GAAP and should not be regarded as substitutes for net income and earnings per unit, basic and diluted. The Partnership’s definition of Adjusted Net Income, Adjusted Net Income per common unit and Adjusted Earnings per common unit, basic and diluted, may not be the same at that reported by other companies in the shipping industry or other industries. The Partnership believes that the presentation of Adjusted Net Income and Adjusted Earnings per unit available to common unitholders are useful to investors because they facilitate the comparability and the evaluation of companies in the Partnership’s industry. In addition, the Partnership believes that Adjusted Net Income is useful in evaluating its operating performance compared to that of other companies in the Partnership’s industry because the calculation of Adjusted Net Income generally eliminates the accounting effects of items which may vary for different companies for reasons unrelated to overall operating performance. The Partnership’s presentation of Adjusted Net Income available to common unitholders and Adjusted Earnings per common unit should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.

Distributable Cash Flow Reconciliation

Distributable Cash Flow with respect to any period presented means Adjusted EBITDA after considering period interest and finance costs and estimated maintenance and replacement capital expenditures. Estimated maintenance and replacement capital expenditures, including estimated expenditures for drydocking, represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by the Partnership’s capital assets. Distributable Cash Flow is a quantitative standard used by investors in publicly-traded partnerships to assist in evaluating a partnership’s ability to make quarterly cash distributions. The Partnership’s calculation of the Distributable Cash Flow may not be comparable to that reported by other companies. Distributable Cash Flow is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of the Partnership’s performance calculated in accordance with GAAP.

LEAVE A COMMENT

×

Comments are closed.