Dynagas LNG Partners LP, an owner and operator of liquefied natural gas carriers, announced its results for the three and six months ended June 30, 2024.Half year Highlights:
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 | Six Months Ended | ||||||||||
| (U.S. dollars in thousands, except per unit data) | June 30, 2024 (unaudited) | June 30, 2023 (unaudited) | June 30, 2024 (unaudited) | June 30, 2023 (unaudited) | |||||||
| Voyage revenues | $ | 37,615 | $ | 37,653 | $ | 75,670 | $ | 74,916 | |||
| Net Income | $ | 10,708 | $ | 14,430 | $ | 22,458 | $ | 24,030 | |||
| Adjusted Net Income (1) | $ | 12,385 | $ | 5,842 | $ | 24,739 | $ | 12,361 | |||
| Operating income | $ | 18,821 | $ | 18,298 | $ | 38,158 | $ | 37,642 | |||
| Adjusted EBITDA(1) | $ | 28,561 | $ | 23,015 | $ | 57,564 | $ | 46,579 | |||
| Earnings per common unit | $ | 0.20 | $ | 0.31 | $ | 0.43 | $ | 0.50 | |||
| Adjusted Earnings per common unit (1) | $ | 0.25 | $ | 0.08 | $ | 0.50 | $ | 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 June 30, 2024 and 2023 Financial Results
Net Income for the three months ended June 30, 2024 was $10.7 million as compared to $14.4 million for the corresponding period of 2023, which represents a decrease of $3.7 million, or 25.7%. The decrease in Net Income for the three months ended June 30, 2024 was mainly attributable to the decrease in the gain on our interest rate swap transaction which matures on September 18, 2024 and the increase in the loss on debt extinguishment as a result of the full prepayment of outstanding amounts under the $675 million credit facility on June 27, 2024. The above decrease in Net Income was partially counterbalanced by the decrease in interest and finance costs as well as by the decrease in the vessels’ operating expenses and dry-docking and special survey costs attributable to the scheduled dry-docks of the Arctic Aurora, the Lena River and the Yenisei River which were partially completed in the three months ended June 30, 2023.
Adjusted Net Income (a non-GAAP financial measure) for the three months ended June 30, 2024 was $12.4 million compared to $5.8 million for the corresponding period of 2023, which represents a net increase of $6.6 million, or 113.8%. This increase is mainly attributable to the increase in the cash voyage revenues of the Arctic Aurora as explained below, as well as to the decrease of interest and finance costs compared to the corresponding period of 2023, which excludes the effect of the realized gain of $6.1 million on the interest rate swap in the period. Including the effect of the realized gain on our interest rate swap, Adjusted Net Income and Adjusted Earnings per common unit for the three months ended June 30, 2024 amounted to $18.5 million and $0.41, respectively.
Voyage revenues for the three months ended June 30, 2024 were $37.6 million as compared to $37.7 million for the corresponding period of 2023, which represents a net decrease of $0.1 million or 0.26%, which is mainly attributable to the increase in the cash revenues of the Arctic Aurora following its new time charter party agreement with Equinor ASA, which commenced in September 2023, which was netted by the corresponding decrease in its deferred revenue amortization.
The Partnership reported average daily hire gross of commissions(1) of approximately $72,010 per day per vessel for the three-month period ended June 30, 2024, compared to approximately $61,800 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 June 30, 2024 and at 91.7% fleet utilization during the corresponding period in 2023, due to unscheduled repairs of the OB River.
Vessel operating expenses were $7.7 million, which corresponds to a daily rate per vessel of $14,141 for the three-month period ended June 30, 2024, as compared to $8.1 million, or a daily rate per vessel of $14,824, 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 June 30, 2024 compared to the corresponding period in 2023.
Adjusted EBITDA (a non-GAAP financial measure) for the three months ended June 30, 2024 was $28.6 million, as compared to $23.0 million for the corresponding period of 2023. The increase of $5.6 million, or 24.3%, was mainly attributable to the abovementioned increase in cash revenues of the Arctic Aurora and the decrease in the operating expenses.
Net Interest and finance costs were $8.2 million in the three months ended June 30, 2024 as compared to $9.2 million in the corresponding period of 2023, which represents a decrease of $1.0 million, or 10.9%, due to the reduction in interest-bearing debt in the three months ended June 30, 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 June 30, 2024, the Partnership reported basic and diluted Earnings per common unit and Adjusted Earnings per common unit, (a non-GAAP financial measure) of $0.20 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, 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 June 30, 2024, the Partnership generated net cash from operating activities of 22.5 million as compared to $8.8 million in the corresponding period of 2023, which represents an increase of $13.7 million, or 155.7% mainly as a result of working capital changes.
As of June 30, 2024, the Partnership reported total cash of $35.6 million. The Partnership’s outstanding financial liabilities as of June 30, 2024 under the CDBL Sale and Leaseback amounted to $345 million, gross of unamortized deferred loan fees, which is repayable within ten years.
On June 19, 2024, the Partnership entered into sale and leaseback agreements 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 for the amount of $71.2 million, $53.6 million, $73.1 million and $147.0 million, respectively (the “Lease Financing”). On June 27, 2024, the Partnership sold and chartered back on a bareboat basis from CDBL, the OB River, the Clean Energy and the Amur River for a period of five years, and the Arctic Aurora for a period of ten years. The Partnership utilized the proceeds from the Lease Financing, together with $63.7 million of its own funds, to fully repay outstanding amounts under its $675 Million Credit Facility. The applicable interest rate is 3-month term SOFR plus a margin. Following the first anniversary of the bareboat charters, the Partnership has the option at any time to repurchase each vessel at a predetermined price as set forth in each respective agreement and at the end of each bareboat period, the Partnership has the obligation to repurchase the respective vessel at a price equal to 20% of the financing amount for the OB River, the Clean Energy and the Amur River and 15% of the financing amount for the Arctic Aurora. The charterhire principals amortize in 20 consecutive quarterly installments for the OB River, the Clean Energy and the Amur River and 40 consecutive quarterly installments for the Arctic Aurora, all paid in arrears. The Partnership is required to maintain at all times a value maintenance ratio of at least 120% of the charterhire principal for each vessel.
Vessel Employment
As of June 30, 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 $1.04 billion, with an average remaining contract term of 6.4 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.