Dynagas LNG Partners LP, an owner and operator of liquefied natural gas carriers, announced its results for the three and nine months ended September 30, 2024.
Nine months Highlights:
- Net Income and Earnings per common unit (basic and diluted) of $37.5 million and $0.75, respectively;
- Adjusted Net Income(1) of $39.2 million and Adjusted Earnings per common unit(1) (basic and diluted) of $0.80;
- Adjusted EBITDA(1) $86.5 million; and
- 100% fleet utilization(2).
Quarter Highlights:
- Net Income and Earnings per common unit (basic and diluted) of $15.1 million and $0.32, respectively;
- Adjusted Net Income(1) of $14.5 million and Adjusted Earnings per common unit(1) (basic and diluted) of $0.30;
- Adjusted EBITDA(1) $28.9 million;
- 100% fleet utilization(2); and
- Declared and paid a cash distribution of $0.5625 per unit on the Partnership’s Series A Preferred Units (NYSE: “DLNG PR A”) for the period from May 12, 2024 to August 11, 2024 and $0.714537806 per unit on the Series B Preferred Units (NYSE: “DLNG PR B”) for the period from May 22, 2024 to August 21, 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.
Subsequent Events:
- Declared a quarterly cash distribution of $0.5625 on the Partnership’s Series A Preferred Units for the period from August 12, 2024 to November 11, 2024, which was paid on November 12, 2024 to all Series A Preferred unitholders of record as of November 5, 2024; and
- Declared a quarterly cash distribution of $0.69999031 on the Partnership’s Series B Preferred Units for the period from August 22, 2024 to November 21, 2024, which is payable on November 22, 2024 to all Series B Preferred unitholders of record as of August 15, 2024.
- The Partnership’s Board of Directors has declared a quarterly cash distribution with respect to the quarter ended September 30, 2024, of $ 0.049 per common unit. This cash distribution will be paid on or about December 12, 2024, to all common unitholders of record as of the close of business on December 9, 2024. The declaration and payment of cash distributions to the Partnership’s unitholders will be subject at all times to the discretion of the Partnership’s Board of Directors. The timing and amount of distributions to common unitholders, if any, will depend on the Partnership’s, financial condition, cash flow, capital requirements, growth opportunities, restrictions in its financing agreements, the provisions of Marshall Islands law affecting the payment of distributions, and other factors. For more information on the Partnership’s cash distribution policy, please see its most recent Annual Report on Form 20-F.
- On November 21, 2024, the Partnership’s Board of Directors authorized the repurchase of up to an aggregate of $10 million of the Partnership’s outstanding common units over the next 12 months (the “Program”). Repurchases of common units under the Program may be made, from time to time, in privately negotiated transactions, in open market transactions, or by other means, including through trading plans intended to qualify under Rule 10b-18 and/or Rule 10b5-1 of the U.S. Securities Exchange Act of 1934, as amended. The amount and timing of any repurchases made under the Program will be in the sole discretion of the Partnership’s management team, and will depend on a variety of factors, including legal requirements, market conditions, other investment opportunities, available liquidity, and the prevailing market price of the common units. The Program does not obligate the Partnership to repurchase any dollar amount or number of common units and the Program may be suspended or discontinued at any time at the Partnership’s discretion.
CEO Commentary:
“We are pleased to report the financial results for the three months ended September 30, 2024.
In the third quarter of 2024, we reported a Net Income of $15.1 million, with earnings per common unit of $0.32. Adjusted EBITDA and Adjusted Net Income reached $28.9 million and $14.5 million respectively.
All six LNG carriers in our fleet are currently operating under long-term charters with international gas companies. These contracts have an average remaining term of 6.2 years. Assuming no unforeseen events, the Partnership expects no vessel availability until 2028. As of November 22, 2024, our estimated contract backlog stands at approximately $1.01 billion, equating to an average of about $168 million per vessel.
We are pleased to announce the reinstatement of a quarterly cash distribution to our common unitholders which reflects our strong cash flow and improved balance sheet. This is a significant milestone for the Partnership after a period during which the Partnership was unable to pay distributions to its common unitholders due to previous financing restrictions which no longer exist after the successful completion of our refinancing in June 2024 on improved terms.
In addition to the cash distribution to our common unitholders, we are pleased with the Board’s authorization of a common unit repurchase program to buy back up to an aggregate of $10 million of the Partnership’s outstanding common units over the next 12 months. We believe it is in the interest of our common unitholders that the Partnership has the authorization to repurchase common units as part of our capital allocation strategy.
Our capital allocation strategy aims not only to return capital to our unitholders but also to strategically position the Partnership for growth, with the flexibility to efficiently allocate capital depending on the circumstances. Our objective is to position the Partnership to capitalize on future market opportunities across not only our core business of LNG carriers but also in other shipping sectors. Moving forward, our priorities remain to provide safe, reliable service to our customers and to effectively allocate capital for the benefit of our common unitholders.
Our robust financial position, highlighted by 100% of our fleet being under time charter until 2028 and the absence of debt maturities until 2029, positions us well for this initiative. Additionally, the current trading price of our common units, which is approximately 45% below our book value, presents a favorable opportunity for value creation through these repurchases. While approving the repurchase program, we carefully considered a variety of factors, including the need to balance returns to our common unitholders with the efficient use of capital for future opportunities while acknowledging the uncertain geopolitical landscape and regulatory environments.
As with our cash distribution to common unitholders, the common unit repurchase program is a significant part of our capital allocation strategy and underscores our confidence in the Partnership and commitment to maximizing value for our unitholders“.
Russian Sanctions Developments
Due to the ongoing Russian conflict 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. and E.U. 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; and
- Sanctions legislation continually changes 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 conflict 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 | Nine Months Ended | |||||||||||
| (U.S. dollars in thousands, except per unit data) | September 30, 2024 (unaudited) | September 30, 2023 (unaudited) | September 30, 2024 (unaudited) | September 30, 2023 (unaudited) | ||||||||
| Voyage revenues | $ | 39,069 | 37,012 | 114,739 | 111,928 | |||||||
| Net Income | $ | 15,054 | 1,380 | 37,512 | 25,410 | |||||||
| Adjusted Net Income(1) | $ | 14,477 | 3,133 | 39,216 | 15,494 | |||||||
| Operating income | $ | 19,836 | 9,394 | 57,994 | 47,036 | |||||||
| Adjusted EBITDA(1) | $ | 28,901 | 20,384 | 86,465 | 66,963 | |||||||
| Earnings per common unit | $ | 0.32 | (0.04 | ) | 0.75 | 0.45 | ||||||
| Adjusted Earnings per common unit(1) | $ | 0.30 | 0.01 | 0.80 | 0.18 | |||||||
(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 September 30, 2024 and 2023 Financial Results
Net Income for the three months ended September 30, 2024 was $15.1 million as compared to $1.4 million for the corresponding period of 2023, which represents an increase of $13.7 million, or 978.6%. The increase in Net Income for the three months ended September 30, 2024 compared to the corresponding quarter of 2023 was mainly attributable to: (i) the increase in voyage revenues and decrease in vessel operating expenses, as explained below, (ii) the decrease in interest and finance costs, as explained below, (iii) the decrease in the vessels’ dry-docking and special survey costs and (iv) non-recurring other income earned this quarter from insurance claims received for damages incurred in prior years. The above increase in Net Income was partially counterbalanced by the decrease in interest rate swap gains and the decrease in Revenues from contracts which were received by charterers in accordance with time charter agreements, for the dry-docking and special survey costs of certain of the Partnership’s vessels, which was completed in the three months to September 30, 2023.
Adjusted Net Income (a non- GAAP financial measure) for the three months ended September 30, 2024 was $14.5 million compared to $3.1 million for the corresponding period of 2023, which represents a net increase of $11.4 million, or 367.7%. This increase is mainly attributable to the increase in the cash voyage revenues (as explained below) and the decrease of the vessels’ operating expenses, as well as the decrease of interest and finance costs compared to the corresponding period of 2023, which excludes the effect of the realized gain of $5.3 million on the interest rate swap in the period. The interest rate swap matured on September 18, 2024.
Voyage revenues for the three months ended September 30, 2024 were $39.1 million as compared to $37.0 million for the corresponding period of 2023, which represents a net increase of $2.1 million or 5.7% which is mainly attributable to the increase in the 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 $72,800 per day per vessel for the three-month period ended September 30, 2024, compared to approximately $68,800 per day per vessel for the corresponding period of 2023. The Partnership’s vessels operated at 100% fleet utilization during the three-month period ended September 30, 2024 and at 99.8% fleet utilization during the corresponding period in 2023.
Vessel operating expenses were $8.1 million, which corresponds to a daily rate per vessel of $14,656 for the three-month period ended September 30, 2024, as compared to $10.6 million, or a daily rate per vessel of $19,288, in the corresponding period of 2023. This decrease is mainly attributable to lower planned technical maintenance on the Partnership’s vessels in the three- month period ending September 30, 2024 compared to the corresponding period in 2023.
Adjusted EBITDA (a non- GAAP financial measure) for the three months ended September 30, 2024 was $28.9 million, as compared to $20.4 million for the corresponding period of 2023. The increase of $8.5 million, or 41.7%, was mainly attributable to the abovementioned increase in cash voyage revenues of the Arctic Aurora and the decrease in the operating expenses.
Net Interest and finance costs were $6.3 million in the three months ended September 30, 2024 as compared to $9.2 million in the corresponding period of 2023, which represents a decrease of $2.9 million, or 31.5%, mainly due to the reduction in interest-bearing debt in the three months ended September 30, 2024, compared to the corresponding period in 2023, resulting from the refinancing of the Partnership’s indebtedness in June 2024.
For the three months ended September 30, 2024, the Partnership reported basic and diluted Earnings per common unit and Adjusted Earnings per common unit, (a non- GAAP financial measure) of $0.32 and $0.30, 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, were 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 condensed financials presented below.
(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 September 30, 2024, the Partnership generated net cash from operating activities of $25.6 million as compared to $21.8 million in the corresponding period of 2023, which represents an increase of $3.8 million, or 17.4% mainly as a result of the increase in the adjusted EBITDA net of working capital changes and the decrease of interest and finance costs.
As of September 30, 2024, the Partnership reported total cash of $52.0 million. The Partnership’s outstanding financial liabilities as of September 30, 2024 under the Sale and Leaseback with China Development Bank Financial Leasing Co. Ltd. amounted to $333.9 million, gross of unamortized deferred loan fees, which is repayable within approximately ten years.
Vessel Employment
As of September 30, 2024, the Partnership had estimated contracted time charter coverage(1) for 100%, 100% and 100% 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 $1.03 billion, with an average remaining contract term of 6.3 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) $0.11 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 vessel’s operating costs.