Dynagas LNG Partners LP, an owner and operator of liquefied natural gas (“LNG”) carriers, today announced its results for the three months ended March 31, 2024.
Quarter Highlights:
- Net Income and Earnings per common unit (basic and diluted) of $11.8 million and $0.23, respectively;
- Adjusted Net Income(1) of $12.4 million and Adjusted Earnings per common unit(1) (basic and diluted) of $0.25;
- Adjusted EBITDA(1) $29.0 million;
- 100% fleet utilization(2); and
- Declared and paid a cash distribution of $0.5625 per unit on its Series A Preferred Units (NYSE: “DLNG PR A”) for the period from November 12, 2023 to February 11, 2024 and $0.71764025 per unit on the Series B Preferred Units (NYSE: “DLNG PR B”) for the period from November 22, 2023 to February 21, 2024.
Subsequent Events:
- Declared a quarterly cash distribution of $0.5625 on the Partnership’s Series A Preferred Units for the period from February 12, 2024 to May 11, 2024, which was paid on May 13, 2024 to all preferred Series B unit holders of record as of May 6, 2024;
- Declared a quarterly cash distribution of $0.69853375 on the Partnership’s Series B Preferred Units for the period from February 22, 2024 to May 21, 2024, which was paid on May 22, 2024 to all preferred Series B unit holders of record as of May 15, 2024; and
- On June 19, 2024, the Partnership entered into definitive documentation with subsidiaries of China Development Bank Financial Leasing Co. Ltd. (“CDBL”) for a $345.0 million lease financing agreement of four out of its six LNG carriers. On June 27, 2024, the new lease facility, together with available cash, were used to fully prepay the $675 million Credit Facility, which was scheduled to mature in September 2024.
(1) Adjusted Net Income, Adjusted Earnings per common unit and Adjusted EBITDA are not recognized measures under U.S. GAAP. Please refer to Appendix B of this press release for the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP and other related information.
(2) Please refer to Appendix B for additional information on how we calculate fleet utilization.
CEO Commentary:
We are pleased to report the results for the three months ended March 31, 2024.
For the first quarter of 2024, we reported Net Income of $11.8 million, earnings per common unit of $0.23, Adjusted Net Income of $12.4 million and Adjusted EBITDA of $29.0 million.
All six LNG carriers in our fleet are operating under their respective long-term charters with international gas companies with an average remaining contract term of 6.6 years. Barring any unforeseen events, the Partnership will have no contractual vessel availability until 2028. Our estimated contract backlog currently stands at approximately $1.07 billion equating to approximately $178 million per vessel as of June 27, 2024.
We are pleased to announce a new lease financing agreement with China Development Bank Financial Leasing Co. Ltd for four of our LNG carriers. This financing, totaling $345.0 million, along with our available cash reserves, has enabled us to fully prepay our existing outstanding debt in the amount of $408 million before its maturity in September 2024. After a protracted period of strategic deleveraging, we now enjoy significantly lower debt levels and a flexible financing package with two of our LNG carriers debt free. This positions us well in the next phase of the Partnership’s development.
Russian Sanctions Developments
Due to the ongoing Russian conflicts with Ukraine, the United States (“U.S.”), European Union (“E.U.”), Canada and other Western countries and organizations have announced and enacted numerous sanctions against Russia to impose severe economic pressure on the Russian economy and government.
As of today’s date:
- Current U.S. sanctions regimes do not materially affect the business, operations or financial condition of the Partnership and, to the Partnership’s knowledge, its counterparties are currently performing their obligations under their respective time charters in compliance with applicable U.S. and E.U. rules and regulations.
- On June 24, 2024, the E.U. issued its 14th sanctions package which, for the first time, targets the LNG sector of the Russian economy. E.U. laws now prohibit reloading services in the territory of the E.U. for the purposes of transshipment operations where such services are used to transship Russian LNG, except in the case of such transshipments to E.U. member states. That prohibition covers both ship-to-ship transfers and ship-to-shore transfers and re-loading operations. Ancillary services related to such transshipments are also banned. Also, information requirements apply to legal persons performing unloading operations. Certain limited exemptions apply. The Partnership is currently in the process of assessing the impact this new set of sanctions will have on its operations.
- Sanctions legislation has been changing and the Partnership continues to monitor such changes as applicable to the Partnership and its counterparties.
The full impact of the commercial and economic consequences of the Russian conflict with Ukraine is uncertain at this time. The Partnership cannot provide any assurance that any further development in sanctions, or escalation of the Ukraine situation more generally, will not have a significant impact on its business, financial condition or results of operations. Please see the section of this press release entitled “Forward Looking Statements.”
Financial Results Overview:
| Three Months Ended | ||||||
| (U.S. dollars in thousands, except per unit data) | March 31, 2024 (unaudited) | March 31, 2023 (unaudited) | ||||
| Voyage revenues | $ | 38,055 | $ | 37,263 | ||
| Net Income | $ | 11,750 | $ | 9,600 | ||
| Adjusted Net Income (1) | $ | 12,354 | $ | 6,519 | ||
| Operating income | $ | 19,337 | $ | 19,344 | ||
| Adjusted EBITDA(1) | $ | 29,003 | $ | 23,564 | ||
| Earnings per common unit | $ | 0.23 | $ | 0.18 | ||
| Adjusted Earnings per common unit (1) | $ | 0.25 | $ | 0.10 | ||
(1) Adjusted Net Income, Adjusted EBITDA and Adjusted Earnings per common unit are not recognized measures under U.S. GAAP. Please refer to Appendix B of this press release for the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.
Three Months Ended March 31, 2024 and 2023 Financial Results
Net Income for the three months ended March 31, 2024 was $11.8 million as compared to $9.6 million for the corresponding period of 2023, which represents an increase of $2.2 million, or 22.9%. The increase in net income for the three months ended March 31, 2024 compared to the corresponding period of 2023, was mainly attributable to the increase in the gain on our interest rate swap transaction and to the decrease interest and finance costs.
Adjusted Net Income (a non-GAAP financial measure) for the three months ended March 31, 2024 was $12.4 million as compared to $6.5 million for the corresponding period of 2023, which represents a net increase of $5.9 million or 90.8%. This increase was mainly attributable to the increase in the cash voyage revenues of the Arctic Aurora as explained below.
Voyage revenues for the three months ended March 31, 2024 were $38.1 million as compared to $37.3 million for the corresponding period of 2023, which represents a net increase of $0.8 million or 2.1%. This increase was mainly attributable to the increase in voyage revenues of the Arctic Aurora following its new time charter party agreement with Equinor ASA, which commenced in September 2023.
The Partnership reported average daily hire gross of commissions(1) of approximately $72,770 per day per vessel in the three-month period ended March 31, 2024, compared to approximately $62,130 per day per vessel for the corresponding period of 2023. During both three-month periods ended March 31, 2024 and March 31, 2023, the Partnership’s vessels operated at 100% utilization.
Vessel operating expenses were $7.7 million, which corresponds to a daily rate per vessel of $14,103 in the three-month period ended March 31, 2024, as compared to $7.3 million, or a daily rate per vessel of $13,511 in the corresponding period of 2023. This increase was mainly attributable to the increased planned technical maintenance on the Partnership’s vessels in the three months ended March 31, 2024 compared to the corresponding period in 2023.
Adjusted EBITDA (a non-GAAP financial measure) for the three months ended March 31, 2024 was $29.0 million, as compared to $23.6 million for the corresponding period of 2023. The increase of $5.4 million, or 22.9%, was mainly attributable to the abovementioned increase in revenues of the Arctic Aurora which was partly compensated by the increase in the operating expenses.
Interest and finance costs, net were $8.7 million in the three months ended March 31, 2024 as compared to $9.2 million in the corresponding period of 2023, which represents a decrease of $0.5 million, or 5.4% due to the reduction in interest-bearing debt in the three months ended March 31, 2024, compared to the corresponding period in 2023, which was partly offset by the increase in the weighted average interest rate as compared to the corresponding period of 2023.
For the three months ended March 31, 2024, the Partnership reported basic and diluted Earnings per common unit and Adjusted Earnings per common unit, (a non- GAAP financial measure), of $0.23 and $0.25 respectively, after taking into account the distributions relating to the Series A Preferred Units and the Series B Preferred Units on the Partnership’s Net Income/Adjusted Net Income. Earnings per common unit and Adjusted Earnings per common unit, basic and diluted, are calculated on the basis of a weighted average number of 36,802,247 common units outstanding during the period and in the case of Adjusted Earnings per common unit after reflecting the impact of certain adjustments presented in Appendix B of this press release.
Adjusted Net Income, Adjusted EBITDA and Adjusted Earnings per common unit are not recognized measures under U.S. GAAP. Please refer to Appendix B of this press release for the definitions and reconciliation of these measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.
Amounts relating to variations in period on period comparisons shown in this section are derived from the unaudited condensed financial statement contained herein.
(1) Average daily hire gross of commissions is a non-GAAP financial measure and represents voyage revenue excluding the non-cash time charter deferred revenue amortization, divided by the Available Days in the Partnership’s fleet as described in Appendix B.
Liquidity/ Financing/ Cash Flow Coverage
During the three months ended March 31, 2024, the Partnership generated net cash from operating activities of $11.6 million as compared to $13.7 million in the corresponding period of 2023, which represents a decrease of $2.1 million, or 15.3% mainly as a result of working capital changes.
As of March 31, 2024, the Partnership reported total cash of $76.2 million. The Partnership’s outstanding indebtedness as of March 31, 2024 under the $675 million credit facility amounted to $408.6 million, gross of unamortized deferred loan fees, which was repayable within one year.
On June 19, 2024, the Partnership entered into a sale and leaseback agreement with China Development Bank Financial Leasing Co. Ltd. (“CDBL”) for four of its vessels, the Ob River, the Clean Energy, the Amur River, and the Arctic Aurora in an amount up to $345.0 million (the “Lease Financing”) for the purpose of refinancing, together with other sources of liquidity, its $675 Million Credit Facility. On June 27, 2024, the Lease Financing closed and the Partnership utilized the proceeds, together with available cash, to fully prepay its $675 Million Credit Facility. According to the agreed terms of the Lease Financing, the Partnership sold and simultaneously chartered back on a bareboat basis the OB River, the Clean Energy and the Amur River (“the Three Vessels”) for a five-year period and the Arctic Aurora for a ten- year period, starting on June 27, 2024. The financing amount is 65% and 85% of the Market Price on delivery of the Three Vessels and the Arctic Aurora, respectively, and is scheduled to be repaid in twenty and forty consecutive quarterly installments respectively. The financing’s applicable interest rate is three-month Term SOFR plus a margin. At the end of the bareboat charter period, the Partnership will have the obligation to repurchase the vessels for 20% and 15% of the financing amount of the Three Vessels and the Arctic Aurora, respectively. The Partnership will be required to maintain a minimum market value of at least 120% of the outstanding principal balance throughout the charter period.
Vessel Employment
As of June 27, 2024, the Partnership had estimated contracted time charter coverage(1) for 100%, 100% and 99% of its fleet estimated Available Days (as defined in Appendix B) for 2024, 2025 and 2026, respectively.
As of the same date, the Partnership’s estimated contracted revenue backlog (2) (3) was $1.07 billion, with an average remaining contract term of 6.6 years.
(1) Time charter coverage for the Partnership’s fleet is calculated by dividing the fleet contracted days on the basis of the earliest estimated delivery and 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.
(2) The Partnership calculates its estimated contracted revenue backlog by multiplying the contractual daily hire rate by the expected number of days committed under the contracts (assuming earliest delivery and redelivery and 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 disclosed due to, for example, dry-docking and/or special survey downtime, maintenance projects, off-hire downtime and other factors that result in lower revenues than the Partnership’s average contract backlog per day.
(3) The amount of $0.12 billion of the revenue backlog estimate relates to the estimated portion of the hire contained in certain time charter contracts with Yamal Trade Pte. Ltd. which represents the operating expenses of the respective vessels and is subject to yearly adjustments on the basis of the actual operating costs incurred within each year. The actual amount of revenues earned in respect of such variable hire rate may therefore differ from the amounts included in the revenue backlog estimate due to the yearly variations in the respective vessels’ operating costs.