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, 2023.

Quarter Highlights:

• Net Income and Earnings per common unit (basic and diluted) of $9.6 million and $0.18, respectively;
• Adjusted Net Income(1) of $6.5 million and Adjusted Earnings(1) per common unit (basic and diluted) of $0.10;
• Adjusted EBITDA(1) $23.6 million;
• 100% fleet utilization(2);
• Declared and paid cash distribution of $0.5625 per unit on its Series A Preferred Units (NYSE: “DLNG PR A”) for the period from November 12, 2022 to February 11, 2023
• and $0.546875 per unit on the Series B Preferred Units (NYSE: “DLNG PR B”) for the period from November 22, 2022 to February 21, 2023; and
• On March 27, 2023, the Partnership, in agreement with all lenders of its $675 million credit facility, made a voluntary loan prepayment of $31.3 million. An amount equal to the above- mentioned prepayment was released from the cash collateral account in order to make the prepayment.

Subsequent Events:

• Declared a quarterly cash distribution of $0.5625 on the Partnership’s Series A Preferred Units for the period from February 12, 2023 to May 11, 2023, which was paid on May 12, 2023 to all preferred Series A unit holders of record as of May 5, 2023; and
• Declared a quarterly cash distribution of $0.546875 on the Partnership’s Series B Preferred Units for the period from February 22, 2023 to May 21, 2023, which was paid on May 22, 2023 to all preferred Series B unit holders of record as of May 15, 2023.

(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, 2023.

For the first quarter of 2023, we reported Net Income of $9.6 million, Earnings per common unit of $0.18, Adjusted Net Income of $6.5 million and Adjusted EBITDA of $23.6 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 6.1 years. As of June 20, 2023, our estimated contracted revenue backlog was $0.96 billion.

We have remained committed to our strategy of creating equity value through reducing debt and have since September 2019, repaid $218.4 million in debt, which includes two voluntary loan prepayments of $18.7 million and $31.3 million, which were effected on October 12, 2022 and on March 27, 2023, respectively, in agreement with the lenders of our $675 million credit facility. The current debt outstanding is $456.6 million.

Since December 31, 2019 we have reduced our net leverage ratio from 6.6 to 4.5, while also increasing our book equity value by 37% to, $430.6 million.

Gas prices in the main pricing hubs are currently significantly lower compared to a year ago when gas prices were driven to new highs as a result of the Russian – Ukraine situation. The spread however between US feed gas prices and LNG prices in Europe and the Far East continues to be healthy. We believe this is positive for economic sustainability and therefore global growth as well as for gas producers. It is being increasingly appreciated that LNG is a necessary ingredient to managing global emissions as well as energy security and, despite cost increases, we expect the continuation of Final Investment Decisions being received by mature LNG production projects, the execution of new long-term LNG sales and purchase agreements and consequently the continued demand for LNG Shipping.

In light of these developments, we believe that the outlook for LNG shipping and the Partnership remains positive.

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. 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 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.”

Three Months Ended March 31, 2023 and 2022 Financial Results

Net Income for the three months ended March 31, 2023 was $9.6 million as compared to a Net Income of $23.9 million for the corresponding period of 2022, which represents a decrease of $14.3 million, or 59.8%. The decrease in net income for the three months ended March 31, 2023 compared to the corresponding period of 2022, was mainly attributable to the decrease in the gain on our interest rate swap transaction and the increase in the interest and finance costs, net, which were partly offset by an increase in voyage revenues and the decrease in dry-docking and special survey costs.

Adjusted Net Income (a non-GAAP financial measure) for the three months ended March 31, 2023 was $6.5 million compared to $10.0 million for the corresponding period of 2022, which represents a net decrease of $3.5 million or 35%. This decrease is mainly attributable to the increase in the interest and finance costs, net, compared to the corresponding period in 2022, which excludes the effect of the realized gain on our interest rate swap in the period. Including the effect of the realized gain on our interest rate swap, Adjusted Earnings per common unit for the three months ended March 31, 2023 amounted to $0.25.

Voyage revenues for the three months ended March 31, 2023 were $37.3 million as compared to $33.3 million for the corresponding period of 2022, which represents a net increase of $4.0 million or 12.0%. This increase is mainly attributable to the increase in the deferred revenue amortization relating to the new time charter party agreement with Equinor ASA for the new employment of the Arctic Aurora which will commence in September 2023, as well as to the higher revenue earning days of the Clean Energy in the three months ended March 31, 2023 compared to the corresponding period of 2022, due to the scheduled dry-dock of the Clean Energy which took place in the three months ended March 31, 2022.

The Partnership reported average daily hire gross of commissions(1) of approximately $62,130 per day per vessel in the three-month period ended March 31, 2023, compared to approximately $63,130 per day per vessel for the corresponding period of 2022. During both three-month periods ended March 31, 2023 and March 31, 2022, the Partnership’s vessels operated at 100% utilization.

Vessel operating expenses were $7.3 million, which corresponds to a daily rate per vessel of $13,511 in the three-month period ended March 31, 2023, as compared to $7.6 million, or a daily rate per vessel of $13,998 in the corresponding period of 2022. This decrease is mainly attributable to the lower planned technical maintenance and supply costs on the Partnership’s vessels in the three months period ending March 31, 2023 compared to the corresponding period in 2022.

Adjusted EBITDA (a non-GAAP financial measure) for the three months ended March 31, 2023 was $23.6 million, as compared to $22.9 million for the corresponding period of 2022. The increase of $0.7 million, or 3.1%, was mainly attributable to the increase in revenues of the Clean Energy due to the off- hire period during its’ scheduled dry-dock in the three months ended March 31, 2022.

Interest and finance costs, net were $9.2 million in the three months ended March 31, 2023 as compared to $5.1 million in the corresponding period of 2022, which represents an increase of $4.1 million, or 80.4% due to the increase in the weighted average interest rate in the three months period ending March 31, 2023, compared to the corresponding period in 2022, which was partly offset by the reduction in interest bearing debt as compared to the corresponding period of 2022.

For the three months ended March 31, 2023, the Partnership reported basic and diluted Earnings per common unit and Adjusted Earnings per common unit, (a non- GAAP financial measure), of $0.18 and $0.10 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 the non-cash items 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 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, 2023, the Partnership generated net cash from operating activities of $13.7 million as compared to $24.8 million in the corresponding period of 2022, which represents a decrease of $11.1 million, or 44.8% mainly as a result of higher loan interest payments and working capital changes.

As of March 31, 2023, the Partnership reported total cash of $52.9 million. On March 27, 2023, the Partnership, in agreement with all lenders of the $675 million credit facility, made a voluntary prepayment of $31.3 million. An amount equal to the above- mentioned prepayment was released from the cash collateral account in order to make the prepayment. The Partnership’s outstanding indebtedness as of March 31, 2023 under the $675 million credit facility amounted to $456.6 million, gross of unamortized deferred loan fees and including $48.0 million, which was repayable within one year.

As of March 31, 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 is available to the Partnership at any time until November 14, 2023.

Vessel Employment

As of June 20, 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 and 2025.

As of the same date, the Partnership’s estimated contracted revenue backlog (2)(3) was $0.96 billion, with an average remaining contract term of 6.1 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 $0.13 billion of the revenue backlog estimate relates to the estimated portion of the hire contained in certain time charter contracts with Yamal 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.
Source: Dynagas LNG Partners