Dynagas Partners profit rises above forecasts

Procopiou _ Dynagas

Dynagas LNG Partners LP, an owner and operator of liquefied natural gas (“LNG”) carriers, announced its results (unaudited) for the three and nine months ended September 30, 2016.

Three and Nine Months Ended September 30, 2016 Highlights:

Distributable Cash Flow(1) during the three and nine months ended September 30, 2016 of $23.0 million and $68.3 million, respectively;
Adjusted EBITDA(1) for the three and nine months ended September 30, 2016 of $35.4 million and $105.6 million, respectively;
Net income during the three and nine months ended September 30, 2016 of $17.3 million and $51.4 million, respectively;
Adjusted Net Income(1) for the three and nine months ended September 30, 2016 of $19.1 million and $56.8 million, respectively;
Earnings per common unit for the three and nine months ended September 30, 2016 of $0.44 and $1.30, respectively;
Adjusted Earnings per common unit(1)(2) for the three and nine months ended September 30, 2016 of $0.49 and $1.45, respectively;
New multi-year charter deal with Gazprom for the Clean Energy and amendments to the existing Gazprom time charters for the Yenisei River and the Lena River;
$84.1 million of reported cash and $114.1 million of available liquidity as of September 30, 2016;
Quarterly cash distribution of $0.4225 per common unit in respect of the third quarter and $0.5625 per preferred unit in respect of the most recent period.
(1) Distributable Cash Flow, Adjusted EBITDA, Adjusted Net Income 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.
(2) Adjusted Earnings per common unit presentation eliminates the effect of the Series A Preferred Units interest on the Partnership’s net income for the periods presented.

Recent Developments:

Quarterly Common and Subordinated Unit Cash Distribution: On October 4, 2016, the Partnership’s Board of Directors announced a quarterly cash distribution of $0.4225 per common and subordinated unit in respect of the third quarter of 2016. This cash distribution was paid on October 18, 2016 to all unitholders of record as of October 11, 2016.

Series A Preferred Units Cash Distribution: On October 21, 2016, the Partnership’s Board of Directors also announced a cash distribution of $0.5625 per unit of its Series A Preferred Units (NYSE:DLNG PR A) for the period from August 12, 2016 to November 11, 2016, which was paid on November 12, 2016 to all unitholders of record as of November 5, 2016.

New long-term time charter contract for the Clean Energy: On October 31, 2016, the Partnership, through one of its wholly owned subsidiaries, entered into a new long-term charter agreement with an affiliate of the Gazprom Group (“Gazprom”) for the employment of its 2007 built 150,000 cbm steam turbine LNG carrier Clean Energy. The charter is expected to commence in July 2018 and will have a firm term of seven years and nine months. The Partnership expects to generate approximately $133.0 million of gross contracted revenues over the life of the contract.

Charter Amendments for the Lena River and the Yenisei River: In connection with the new long-term charter contract for the employment of the Clean Energy, on October 31, 2016, the Partnership reached an agreement with Gazprom to reduce the charter hire rate on the existing time-charter contracts with its wholly owned subsidiaries that own the 2013 built ice-class notated LNG carriers the Lena River and the Yenisei River. The charter hire reductions were effective from November 1, 2016 and over the remaining term of the respective charters. Following these amendments, the Partnership expects to incur an aggregate $18.3 million reduction in gross contracted revenues over their remaining term.

Chief Executive Officer Commentary:

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

“We are pleased to report our earnings for the third quarter of 2016, which has been a record financial quarter for us. Adjusted EBITDA increased by approximately 22% to $35.4 million compared to the corresponding quarter in 2015. Our Adjusted Earnings per common unit this past quarter was $0.49, an increase of about 20% compared to the corresponding quarter in 2015. Our current fleet of six LNG carriers operated at 100% utilization, which also contributed to our strong quarterly results.

“Our income is derived from the employment of our vessels on fixed long-term charter contracts. The revenues we earn under those charter contracts are based on a fixed day rate basis and not linked to commodity price fluctuations. On October 18, 2016, we paid quarterly cash distribution of $0.4225 per common and subordinated unit with respect to the third quarter of 2016. Since our initial public offering on November 2013, we have paid total cash distributions amounting to $4.67 per common and subordinated unit. On November 12, 2016, we paid a cash distribution of $0.5625 per unit on our Series A Preferred Units for the period from August 12, 2016 to November 11, 2016 to all holders of the Series A Preferred Units as of November 5, 2016.

“Consistent with our prior disclosure, we are focused on obtaining additional vessel contract coverage. We, through one of our wholly-owned subsidiaries, entered into a new long term charter agreement with Gazprom for the Clean Energy with a firm term of seven years and nine months. We also agreed with Gazprom to amend the existing time charters for the Yenisei River and the Lena River. While the Yenisei River and the Lena River charter amendments resulted in the reduction of contracted revenues by approximately $18 million, the overall effect of the new long-term employment of these three vessels is expected to result in additional contract coverage and an increase in our combined contract backlog by approximately $115 million to approximately $1.61 billion as of the date of this release.

“With our fleet fully contracted through 2016 and 89% contracted through 2017, and with an estimated fleet wide average remaining contract duration of 11.0 years, we intend to continue to focus on obtaining additional contract coverage, in 2017 in particular, and managing our operating expenses.

“I look forward to working with our team towards meeting our goals, which we believe will continue to benefit our unitholders.”

Three Months Ended September 30, 2016 and 2015 Financial Results

Net Income for the three months ended September 30, 2016 was $17.3 million, compared to Net Income of $16.0 million in the corresponding period of 2015, which represents a 7.7% increase. Adjusted Net Income for the three months ended September 30, 2016 was $19.1 million, compared to Adjusted Net Income of $16.0 million in the corresponding period of 2015, which represents a 19.1% increase. The increase in both Net Income and Adjusted Net Income was mainly attributable to the contribution of net revenues relating to the Lena River to operating results. The Lena River was acquired from Dynagas Holding Ltd., the Partnership’s Sponsor, late in December 2015.

Adjusted EBITDA for the three months ended September 30, 2016 increased by 22.0% across the quarters (third quarter 2016 Adjusted EBITDA of $35.4 million, compared to third quarter 2015 Adjusted EBITDA of $29.1 million), which was due to the factors discussed above.

The Partnership’s Distributable Cash Flow for the three-month period ended September 30, 2016 was $23.0 million, compared to $18.9 million in the corresponding period of 2015, which represents an increase of $4.1 million, or 21.6%.

For the three-month period ended September 30, 2016, the Partnership reported Earnings per common unit and Adjusted Earnings per common basic and diluted unit of $0.44 and $0.49, respectively, after taking into account the Series A Preferred Units interest on the Partnership’s net profit. Earnings per common unit and Adjusted Earnings per common are 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.

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.

Voyage revenues increased to $43.1 million for the three-month period ended September 30, 2016, from $37.0 million for the same period of 2015, due to the increase in Revenue earning days from 460 days during the third quarter of 2015 to 552 days during the third quarter of 2016, which is a result of the growth of the Partnership’s fleet discussed above.

Vessel operating expenses increased by $1.1 million to $6.7 million in the three-month period ended September 30, 2016, from $5.6 million for the same period of 2015. This increase is exclusively attributable to the ownership of the Lena River.

The Partnership reported average daily hire gross of commissions on a cash basis(1) of approximately $81,300 per day per vessel in the three months ended September 30, 2016, compared to approximately $80,400 per day per vessel in the same period of 2015. During the three-month period ended September 30, 2016, 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.

Liquidity/ Financing/ Cash Flow Coverage

As of September 30, 2016, the Partnership reported cash of $84.1 million (including the aggregate $25.0 million minimum cash liquidity requirements imposed by the Partnership’s lenders). Total indebtedness outstanding as of September 30, 2016 was $730.6 million, $32.5 million of which is repayable within one year.

The Partnership’s liquidity profile is further enhanced by the $30.0 million of borrowing capacity under the Partnership’s revolving credit facility with its Sponsor, which is available to the Partnership at any time until November 2018 and remains available in its entirety as of the date of this release.

As of September 30, 2016, the Partnership reported working capital surplus of $6.6 million.

During the three months ended September 30, 2016, the Partnership generated net cash from operating activities of $27.0 million, compared to $27.6 million in the same period of 2015. This slight decrease was mainly attributable to the decrease in income pre-collections and other negative working capital variations between the two periods that overlapped the excess operating cash flows that the Lena River contributed to the Partnership for the quarter ended September 30, 2016.

Vessel Employment

As of November 14, 2016, the Partnership had contracted employment(2) for 100% of its estimated total fleet Available Days through the end of 2016, 89% of its fleet estimated Available Days for 2017 and 75% of its fleet estimated Available Days for 2018.

As of the same date, the Partnership concluded long-term fixtures for four of its vessels, which raise the Partnership’s contracted revenue backlog estimate(3) to approximately $1.61 billion, with an average remaining contract term of 11.0 years.

(2) Time charter coverage for the Partnership’s fleet is calculated by dividing the fleet contracted days on the basis of the earliest estimated redelivery dates prescribed in the Partnership’s current time charter contracts net of scheduled class survey repairs by the number of expected Available days during that period.
(3) 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. Certain time charter contracts that the Partnership recently entered into with Yamal Trade Pte. are subject to the satisfaction of important conditions, which, if not satisfied, or waived by the charterer, may result in their cancellation or amendment before or after the charter term commences and in such case the Partnership may not receive the contracted revenues thereunder.

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