Dynagas LNG Partners LP, an owner and operator of liquefied natural gas (“LNG”) carriers, today announced its results for the three months and year ended December 31, 2022.
Year Highlights:
- Net Income and earnings per common unit (basic and diluted) of $54.0 million and $1.15, respectively;
- Adjusted Net Income(1) of $30.6 million and Adjusted Earnings(1) per common unit (basic and diluted) of $0.52;
- Adjusted EBITDA(1) of $89.5 million;
- 100% fleet utilization(2);
Fourth Quarter Highlights:
- Net Income and earnings per common unit (basic and diluted) of $11.6 million and $0.24, respectively;
- Adjusted Net Income(1) of $7.0 million and Adjusted Earnings(1) per common unit (basic and diluted) of $0.11;
- Adjusted EBITDA(1) of $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 August 12, 2022 to November 11, 2022 and $0.546875 per unit on the Series B Preferred Units (NYSE: “DLNG PR B”) for the period from August 22, 2022 to November 21, 2022;
On October 12, 2022 and pursuant to the designation of Amsterdam Trade Bank (“ATB”) by the Office of Foreign Assets Control as a Specially Designated National, the Partnership, in agreement with all lenders of its $675 Credit Facility, made a voluntary prepayment of $18.73 million which was applied in prepayment of the entire participation of ATB to the $675 Million Credit Facility. An amount equal to the above- mentioned prepayment was released from the Cash Collateral Account in order to make the prepayment; and
Entered into a new time charter party agreement with Equinor ASA (“Equinor”) for the employment of our ice-class LNG carrier Arctic Aurora for a period of approximately three years. Under the new time charter agreement, the Arctic Aurora is expected to be delivered to Equinor in September 2023 in direct continuation of the current charter party with Equinor, meaning there will be no scheduled lapse of time between the current and the new time charter. The term ‘in direct continuation’ does not refer to the contracted income.
Subsequent Events:
Declared a quarterly cash distribution of $0.5625 on the Partnership’s Series A Preferred Units for the period from November 12, 2022 to February 11, 2023, which was paid on February 13, 2023 to all preferred Series A unit holders of record as of February 6, 2023; and
Declared a quarterly cash distribution of $0.546875 on the Partnership’s Series B Preferred Units for the period from November 22, 2022 to February 21, 2023, which was paid on February 22, 2023 to all preferred Series B unit holders of record as of February 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 and full year ended December 31, 2022.
For the fourth quarter of 2022, we reported Net Income of $11.6 million, earnings per common unit of $0.24, Adjusted Net Income of $7.0 million and Adjusted EBITDA of $23.6 million. While future results may vary, we are pleased to report 100% utilization for our fleet for the eleventh quarter in a row which is a testament to the fleet’s performance.
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 6.4 years. As of March 17, 2023, our estimated contracted revenue backlog1 was $1.0 billion2. The earliest contracted re-delivery date for any of our six LNG carriers is in the first quarter of 2026 (for the Clean Energy), subject to the terms of the applicable charter.
We were very pleased with the new 3-year charter of the Arctic Aurora to Equinor (formerly named Statoil), which has chartered the vessel since her delivery from the shipyard in 2013.
The Partnership has remained committed to its strategy of reducing debt and has since September 2019, until the end of December 2022 successfully repaid $175 million in debt. Since December 31, 2019 the Partnership reduced its net leverage from 6.6x to 4.7x, while also improving the book equity value by 35%, now standing at $423.9 million. Going forward, we believe the Partnership’s continued efforts to deleverage will further enhance equity value through stable long-term cash flow visibility.
While we have seen a retraction of gas prices which is a positive development for the economic sustainability of consumers, term LNG shipping rates remain robust. The shipping rates are driven by a long-term demand for LNG shipping which is underpinned by long term SPAs and the importance to secure available emission friendly energy.
In light of these developments, we believe that the outlook for LNG Shipping and the Partnership remains positive.
Three Months Ended December 31, 2022 and 2022 Financial Results
Net Income for the three months ended December 31, 2022 was $11.6 million as compared to a Net Income of $16.9 million for the corresponding period of 2021, which represents a decrease of $5.3 million, or 31.4%. The decrease in net income for the three months ended December 31, 2022 compared to the corresponding period of 2021, was mainly attributable to the decrease in the unrealized gain on our interest rate swap transaction (unrealized loss of $2.2 million incurred during this quarter against an unrealized gain of $5.9 earned during the corresponding period of 2021) which was partly offset by the gain on debt extinguishment recognized in this quarter further to the prepayment of the entire participation of ATB to the $675 Million Credit Facility on October 12, 2022 (see also below under “Liquidity/ Financing/ Cash Flow Coverage”). The realized gain on the interest rate swap transaction which was realized during the fourth quarter of 2022 amounted to $4,3 million (realized loss of $0.4 million paid during the corresponding period of 2021) which offset the increase in the interest and finance costs compared to the corresponding period of 2021.
Adjusted Net Income (a non-GAAP financial measure) for the three months ended December 31, 2022 was $7.0 million compared to $11.4 million in the corresponding period of 2021, which represents a net decrease of $4.4 million or 38.6%. This decrease is mainly attributable to the increase of interest and finance costs compared to the corresponding period of 2021 which excludes the effect of the realized gain on our interest rate swap transaction mentioned above.
Voyage revenues for the three months ended December 31, 2022 were $35.1 million compared to $35.7 million for the corresponding period of 2021, which represents a net decrease of $0.6 million or 1.7%, mainly as a result of the lower variable hire revenues earned on the Lena River and the Yenisei River in the three months ended December 31, 2022 compared to the corresponding period in 2021.
The Partnership reported average daily hire gross of commissions(1) of approximately $62,700 per day per vessel in the three-month period ended December 31, 2022, compared to approximately $64,500 per day per vessel for the corresponding period of 2021. During both three-month periods ended December 31, 2022 and 2021, the Partnership’s vessels operated at 100% utilization.
Vessel operating expenses were $7.8 million, which corresponds to daily operating expenses per vessel of $14,060 in the three-month period ended December 31, 2022, as compared to $8.2 million, or daily operating expenses per vessel of $14,799 in the corresponding period in 2021. The decrease of $0.4 million, or 4.9%, was mainly attributable to the lower vessel maintenance costs of the Lena River and the Yenisei River in the three months ended December 31, 2022 compared to the corresponding period in 2021.
Adjusted EBITDA (a non-GAAP financial measure) for the three months ended December 31, 2022 was $23.6 million, as compared to $24.7 million for the corresponding period of 2021. The decrease of $1.1 million, or 4.5%, was mainly attributable to the effect of the decrease in voyage revenues as adjusted for the effects of the amortization of deferred revenue.
Interest and finance costs, net were $8.6 million in the three months ended December 31, 2022 as compared to $5.3 million in the corresponding period of 2021, which represents an increase of $3.3 million, or 62.3% due to the increase in the weighted average interest rate in the three months period ending December 31, 2022, compared to the corresponding period in 2021, which was partly counterbalanced by the reduction in interest bearing debt as compared to the corresponding period of 2021.
For the three months ended December 31, 2022, the Partnership reported basic and diluted earnings per common unit and Adjusted Earnings per common unit (a non-GAAP financial measure), of $0.24 and $0.11 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 statements 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 December 31, 2022, the Partnership generated net cash from operating activities of $13.4 million as compared to $21.0 million in the corresponding period of 2021, which represents a decrease of $7.6 million, or 36.2% mainly as a result of working capital changes.
As of December 31, 2022, the Partnership reported total cash of $79.9 million (including $31.3 million of restricted cash). On October 12, 2022 and pursuant to the designation of Amsterdam Trade Bank (“ATB”) by the Office of Foreign Assets Control as a Specially Designated National, the Partnership, in agreement with all lenders of the $675 Credit Facility, made a voluntary prepayment of $18.73 million which was applied in prepayment of the entire participation of ATB to the $675 Million Credit Facility less an agreed waived amount of $2.2 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 December 31, 2022 under the $675.0 Million Credit Facility amounted to $499.9 million, gross of unamortized deferred loan fees and including $48.0 million, which was repayable within one year.
As of December 31, 2022, 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 extended on November 14, 2018, and is available to the Partnership at any time until November 2023.
Vessel Employment
As of March 17, 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) was $1.00 billion(3), 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) 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: Hellenic Shipping News
