Dynagas LNG Partners LP, an owner and operator of liquefied natural gas (“LNG”) carriers, announced its results for the three and nine months ended September 30, 2023.

Nine months Highlights:

• Net Income and Earnings per common unit (basic and diluted) of $25.4 million and $0.45, respectively;
• Adjusted Net Income(1) of $15.5 million and Adjusted Earnings per common unit (1) (basic and diluted) of $0.18;
• Adjusted EBITDA(1) $67.0 million; and
• 97% fleet utilization(2).

Quarter Highlights:

• Net Income of $1.4 million and Loss per common unit (basic and diluted) of $0.04;
• Adjusted Net Income(1) of $3.1 million and Adjusted Earnings(1) per common unit (basic and diluted) of $0.01;
• Adjusted EBITDA(1) $20.4 million;
• 99.8% fleet utilization(2);
• 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 May 12, 2023 to August 11, 2023 and $0.546875 per unit on the Series B Preferred Units (NYSE: “DLNG PR B”) for the period from May 22, 2023 to August 21, 2023;
• Completed the scheduled dry-docks of the Yenisei River, Lena River and Arctic Aurora including installation of ballast water treatment equipment in accordance with current regulations;and
• The Arctic Aurora was delivered under its new time charter party agreement with Equinor ASA (“Equinor”) in September, 2023.

Subsequent Events:

• Declared a quarterly cash distribution of $0.5625 on the Partnership’s Series A Preferred Units for the period from August 12, 2023 to November 11, 2023, which was paid on November 13, 2023 to all preferred Series A unit holders of record as of November 6, 2023;
• Declared a quarterly cash distribution of $0.546875 on the Partnership’s Series B Preferred Units for the period from August 22, 2023 to November 21, 2023, which was paid on November 22, 2023 to all preferred Series B unit holders of record as of November 15, 2023; and
• Pursuant to the terms of the Partnership’s Fourth Amended and Restated Agreement of Limited Partnership, from and including November 22, 2023, the applicable distribution rate for the Partnership’s Series B Preferred Units has been converted to a floating rate equal to a successor base rate comparable to the three-month LIBOR rate plus a spread of 5.593% per annum per $25.00 of liquidation preference per unit (the “Series B Distribution Rate”). The Partnership appointed Computershare Trust Company, N.A. to serve as the calculation agent for the Series B Preferred Units with respect to the determination of the applicable Series B Distribution Rate.

CEO Commentary:

We are pleased to report the results for the three and nine months ended September 30, 2023.

For the third quarter of 2023, we reported Net Income of $1.4 million, Adjusted Net Income of $3.1 million and Adjusted EBITDA of $20.4 million.

All six LNG carriers in our fleet are operating under long-term charters with international gas companies with an average remaining contract term of approximately 7.2 years. Barring any unforeseen events, the Partnership will have no contractual vessel availability until 2028. Our estimated contract backlog currently stands at approximately $1.16 billion equating to approximately $193 million per vessel as of December 7, 2023.

The Arctic Aurora was delivered under a new three-year time charter party agreement with Equinor ASA in September, 2023 and we expect her to continue to generate solid cash flow contribution to the Partnership.

We remain committed to our strategy of creating equity value through reducing debt and have since September 2019, repaid $242.4 million in debt, which includes two voluntary loan prepayments of $18.7 million and $31.3 million, effected on October 12, 2022 and March 27, 2023, respectively, in agreement with the lenders of our $675 million credit facility. Since December 31, 2019 we have reduced our net leverage ratio from 6.6 to 4.1, while also increasing our book equity value by 40%, to $441 million. The current debt outstanding under our $675 million credit facility is approximately $432.6 million. One of our main priorities going forward is to refinance the partnerships debt.

We strongly believe in the long term role of natural gas as a vital energy source. Part of its sustained demand stems from its comparatively low emission profile upon combustion and its capacity to generate power swiftly and effectively as and when needed. This is further supported by the existence of a well-developed global infrastructure facilitating its production, transportation, storage, and consumption.

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 September 30, 2023 and 2022 Financial Results

Net Income for the three months ended September 30, 2023 was $1.4 million as compared to a Net Income of $7.4 million for the corresponding period of 2022, which represents a decrease of $6.0 million, or 81.1%. The decrease in Net Income for the three months ended September 30, 2023 was mainly attributable to the increase in vessels’ operating expenses, as well as to the dry-docking and special survey costs attributable to the scheduled dry-docks of the Yenisei River, the Lena River and the Arctic Aurora, which were completed in August 2023 (Yenisei River) and September 2023 (Lena River and Arctic Aurora), and to the decrease in interest rate swap gains and the increase in the interest and finance costs. The decrease in Net income was partly compensated by the increase in Voyage revenues and Revenues from contracts with customers as explained below.

Adjusted Net Income (a non- GAAP financial measure) for the three months ended September 30, 2023 was $3.1 million as compared to $4.5 million for the corresponding period of 2022, which represents a net decrease of $1.4 million, or 31.1%. This decrease is mainly attributable to the increase of interest and finance costs compared to the corresponding period of 2022 which excludes the effect of the realized gain of $6.5 million on the interest rate swap in the third quarter of 2023. Including the effect of the realized gain on the interest rate swap, Adjusted Net Income and Adjusted Earnings per common unit for the three months ended September 30, 2023 amount to $9.6 million and $0.18, respectively.

Voyage revenues for the three months ended September 30, 2023 were $37.0 million as compared to $29.9 million for the corresponding period of 2022, which represents a net increase of $7.1 million or 23.7%, which is mainly attributable to the increase in the non-cash deferred revenue amortization relating to the new time charter party agreement of the Arctic Aurora as well as the increase in available days of the Amur River and the Ob River for the three months ended September 30, 2023 compared to the corresponding period of 2022, due to their scheduled dry-docks which were completed in the third quarter of 2022. The increase in voyage revenues was partly offset by the decrease in the available days of the Yenisei River, the Lena River and the Arctic Aurora in the third quarter of 2023 due to their abovementioned scheduled dry-docks which were completed in this quarter. The Partnership additionally received in the third quarter of 2023 Revenues from contracts with customers of $11.6 million which represents income from the time charterers of certain of its vessels for the dry-docking and special survey costs of these vessels,

The Partnership reported average daily hire gross of commissions(1) of approximately $68,800 per day per vessel in the three-month period ended September 30, 2023, compared to approximately $61,560 per day per vessel for the corresponding period of 2022. The Partnership’s vessels operated at 99.8% fleet utilization during the three-month period ended September 30, 2023.

Vessel operating expenses were $10.6 million, which corresponds to a daily rate per vessel of $19,288 in the three-month period ended September 30, 2023, as compared to $7.0 million, or a daily rate per vessel of $12,743, in the corresponding period of 2022. This increase is mainly attributable to the increased engine overhauling costs on the Arctic Aurora, Yenisei River and the Lena River incurred during the three- month period ending September 30, 2023 compared to the corresponding period in 2022.

Adjusted EBITDA (a non- GAAP financial measure) for the three months ended September 30, 2023 was $20.4 million, as compared to $20.0 million for the corresponding period of 2022.

Net interest and finance costs were $9.2 million in the three months ended September 30, 2023 as compared to $7.4 million in the corresponding period of 2022, which represents an increase of $1.8 million, or 24.3%, due to the increase in the weighted average interest rate in the three- month period ending September 30, 2023, compared to the corresponding period in 2022, which was partly counterbalanced by the reduction in interest bearing debt as compared to the corresponding period of 2022.

For the three months ended September 30, 2023, the Partnership reported basic and diluted Loss per common unit and Adjusted Earnings per common unit (a non- GAAP financial measure) of $0.04 and $0.01, respectively, after taking into account the effect of the distributions relating to the Series A Preferred Units and the Series B Preferred Units on the Partnership’s Net Income/Adjusted Net Income. Loss 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 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 CoverageDuring the three months ended September 30, 2023, the Partnership generated net cash from operating activities of $21.8 million as compared to $10.9 million in the corresponding period of 2022, which represents an increase of $10.9 million, or 100% mainly as a result of working capital changes.

As of September 30, 2023, the Partnership reported total cash of $64.9 million. The Partnership’s outstanding indebtedness as of September 30, 2023 under the $675 million credit facility amounted to $431.2 million, including unamortized deferred loan fees, which is all repayable within one year as of September 30, 2023.

As of September 30, 2023, the Partnership had unused availability of $30.0 million under its interest-free $30.0 million revolving credit facility with its Sponsor, Dynagas Holding Ltd., which was available to the Partnership until November 14, 2023, and was not subsequently renewed.

Vessel Employment

As of September 30, 2023, the Partnership had estimated contracted time charter coverage(1) for 100% of its fleet estimated Available Days (as defined in Appendix B) for 2023, 2024, 2025, 2026 and 2027.

As of the same date, the Partnership’s estimated contracted revenue backlog(2)(3) was $1.16 billion, with an average remaining contract term of 7.2 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) $0.12 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 vessel’s operating costs.

Source: Dynagas LNG Partners LP