Dynagas LNG Partners LP(DLNG) - 2023 Q1 - Quarterly Report

FORM 6-K Filing Information Report Details This section details the filing of Form 6-K by Dynagas LNG Partners LP for the month of March 2023, indicating it files annual reports under Form 20-F - Registrant: Dynagas LNG Partners LP (NYSE: DLNG)[2] - Filing Type: Form 6-K for March 2023, indicating annual reports under Form 20-F[2][3] Information Contained in this Form 6-K Report The Form 6-K includes a press release from Dynagas LNG Partners LP dated March 17, 2023, reporting results for the three months and year ended December 31, 2022 - Attached as Exhibit 99.1 is a press release dated March 17, 2023, reporting results for the three months and year ended December 31, 2022[4] Signatures The report was duly signed on March 20, 2023, by Tony Lauritzen, Chief Executive Officer of Dynagas LNG Partners LP - Signed by Tony Lauritzen, Chief Executive Officer, on March 20, 2023[7] Press Release: Q4 and Full Year 2022 Results Executive Summary & Highlights Dynagas LNG Partners LP reported its financial and operational highlights for the full year and fourth quarter ended December 31, 2022, including net income, adjusted net income, adjusted EBITDA, and 100% fleet utilization. Key subsequent events include preferred unit distributions and a new time charter agreement for the Arctic Aurora Key Financial Metrics (Q4 and Full Year 2022 vs 2021) | Metric | Year Ended Dec 31, 2022 | Q4 Ended Dec 31, 2022 | | :-------------------------- | :---------------------- | :-------------------- | | Net Income | $54.0 million | $11.6 million | | Earnings per common unit | $1.15 | $0.24 | | Adjusted Net Income | $30.6 million | $7.0 million | | Adjusted Earnings per common unit | $0.52 | $0.11 | | Adjusted EBITDA | $89.5 million | $23.6 million | | Fleet Utilization | 100% | 100% | - Declared and paid cash distributions on Series A and Series B Preferred Units for periods ending November 2022 and February 2023[11][12] - Made a voluntary prepayment of $18.73 million on the $675 Million Credit Facility, applied to the entire participation of Amsterdam Trade Bank (ATB) following its designation as a Specially Designated National[11] - Entered into a new approximately three-year time charter party agreement with Equinor ASA for the ice-class LNG carrier Arctic Aurora, effective September 2023, in direct continuation of the current charter[11] CEO Commentary & Strategic Outlook The CEO highlighted consistent 100% fleet utilization, a strong contracted revenue backlog of $1.0 billion with an average remaining term of 6.4 years, and successful debt reduction efforts. Despite gas price retractions, the outlook for LNG shipping remains positive due to robust term shipping rates and long-term demand - Achieved 100% fleet utilization for the eleventh consecutive quarter, demonstrating strong fleet performance[14] - All six LNG carriers are operating under long-term charters with international gas companies, with an average remaining contract term of 6.4 years[15] - Estimated contracted revenue backlog as of March 17, 2023, was $1.0 billion, with the earliest re-delivery date for any vessel in Q1 2026[15] - Successfully repaid $175 million in debt since September 2019 until December 2022, reducing net leverage from 6.6x to 4.7x and improving book equity value by 35% to $423.9 million[19][20] - The outlook for LNG shipping and the Partnership remains positive, driven by robust term LNG shipping rates and long-term demand for LNG shipping, despite a retraction in gas prices[21] Russian Sanctions Developments The Partnership reported that current U.S. and E.U. sanctions against Russia do not materially affect its business or operations, and counterparties are complying. However, the full impact of the conflict and potential future sanctions remains uncertain and could significantly affect the business - Current U.S. and E.U. sanctions regimes do not materially affect the Partnership's business, operations, or financial condition[23] - The Partnership's counterparties are currently performing their obligations under time charters in compliance with applicable U.S. and E.U. rules[23] - The full impact of the commercial and economic consequences of the Russian conflict with Ukraine is uncertain, and further developments in sanctions or escalation could significantly impact the business[22] Financial Performance Analysis For Q4 2022, Net Income decreased by 31.4% to $11.6 million, primarily due to a decrease in unrealized gain on interest rate swaps, partially offset by a gain on debt extinguishment. Adjusted Net Income also decreased by 38.6% to $7.0 million, mainly due to increased interest and finance costs. Voyage revenues saw a slight decrease, while vessel operating expenses improved Key Financial Metrics (Q4 and Full Year 2022 vs 2021) | Metric (in thousands) | Q4 2022 | Q4 2021 | YoY Change (Q4) | FY 2022 | FY 2021 | YoY Change (FY) | | :-------------------- | :------ | :------ | :-------------- | :------ | :------ | :-------------- | | Voyage revenues | $35,064 | $35,678 | -1.7% | $131,657 | $137,746 | -4.4% | | Net Income | $11,618 | $16,941 | -31.4% | $54,010 | $53,260 | +1.4% | | Adjusted Net Income | $6,984 | $11,386 | -38.6% | $30,615 | $43,879 | -30.2% | | Operating income | $16,244 | $16,730 | -2.9% | $45,337 | $64,611 | -29.8% | | Adjusted EBITDA | $23,627 | $24,694 | -4.3% | $89,503 | $97,009 | -7.8% | | Earnings per common unit | $0.24 | $0.38 | -36.8% | $1.15 | $1.14 | +0.9% | | Adjusted Earnings per common unit | $0.11 | $0.23 | -52.2% | $0.52 | $0.88 | -40.9% | - Net Income for Q4 2022 decreased by $5.3 million (31.4%) to $11.6 million, primarily due to a decrease in unrealized gain on interest rate swap transactions (from $5.9 million gain in Q4 2021 to $2.2 million loss in Q4 2022), partly offset by a $2.072 million gain on debt extinguishment[25][57] - Adjusted Net Income for Q4 2022 decreased by $4.4 million (38.6%) to $7.0 million, mainly due to an increase in interest and finance costs[26] - Voyage revenues for Q4 2022 decreased by $0.6 million (1.7%) to $35.1 million, mainly due to lower variable hire revenues from Lena River and Yenisei River[27] - Average daily hire gross of commissions was approximately $62,700 per day per vessel in Q4 2022, down from $64,500 in Q4 2021, while maintaining 100% utilization[28][29] - Vessel operating expenses decreased by $0.4 million (4.9%) to $7.8 million in Q4 2022, corresponding to daily operating expenses of $14,060 per vessel, mainly due to lower maintenance costs for Lena River and Yenisei River[30] - Interest and finance costs, net, increased by $3.3 million (62.3%) to $8.6 million in Q4 2022, driven by a higher weighted average interest rate, partially offset by reduced interest-bearing debt[32] Liquidity/ Financing/ Cash Flow Coverage Net cash from operating activities decreased in Q4 2022, primarily due to working capital changes. The Partnership reported $79.9 million in total cash and reduced its outstanding indebtedness through a voluntary prepayment, while maintaining an unused revolving credit facility - Net cash from operating activities for Q4 2022 was $13.4 million, a decrease of $7.6 million (36.2%) compared to Q4 2021, mainly due to working capital changes[36] - Total cash (including restricted cash) as of December 31, 2022, was $79.9 million[37] - Outstanding indebtedness under the $675.0 Million Credit Facility was $499.9 million as of December 31, 2022, following a $18.73 million voluntary prepayment[37][38] - The Partnership had unused availability of $30.0 million under its interest-free revolving credit facility with its Sponsor, available until November 2023[39] Vessel Employment and Fleet Status As of March 17, 2023, Dynagas LNG Partners LP had 100% contracted time charter coverage for its fleet through 2025, with an estimated revenue backlog of $1.00 billion and an average remaining contract term of 6.4 years - As of March 17, 2023, the Partnership had estimated 100% contracted time charter coverage for its fleet's Available Days for 2023, 2024, and 2025[40] - Estimated contracted revenue backlog was $1.00 billion, with an average remaining contract term of 6.4 years[40] - Approximately $0.13 billion of the revenue backlog estimate relates to variable hire in certain time charter contracts with Yamal, subject to yearly adjustments based on actual operating costs[43] Conference Call and Webcast Information Dynagas LNG Partners LP hosted a conference call and webcast on March 17, 2023, to discuss its financial results, with details provided for participation and access to the archived audio and slide presentation - A conference call was held on March 17, 2023, at 10:00 a.m. Eastern Time to discuss financial results[44] - Details for dial-in and webcast access were provided, including a 'call me' option and availability of a slide presentation in PDF format on the Partnership's website[45][46][47][48] About Dynagas LNG Partners LP Company Overview Dynagas LNG Partners LP is a master limited partnership that owns and operates six liquefied natural gas (LNG) carriers, with an aggregate carrying capacity of approximately 914,000 cubic meters, employed on multi-year charters - Dynagas LNG Partners LP is a master limited partnership owning and operating six LNG carriers[49] - The fleet has an aggregate carrying capacity of approximately 914,000 cubic meters and is employed on multi-year charters[49] Forward-Looking Statements Disclaimer and Risk Factors This section provides a safe harbor statement for forward-looking information, emphasizing that actual results may differ materially due to various risks. Key risk factors include global economic conditions, fluctuations in charter rates, operating expenses, financing availability, regulatory changes, political events (including the Russian conflict and sanctions), and other industry-specific challenges - Statements in the press release may constitute forward-looking statements, protected by the Private Securities Litigation Reform Act of 1995[50][51] - Forward-looking statements are based on assumptions and estimates, but actual results may differ due to significant uncertainties and contingencies beyond the Partnership's control[52] - Key risk factors include: strength of world economies, currency fluctuations, general market conditions (charter rates, vessel values), changes in supply/demand for LNG shipping, operating expenses (bunker prices, drydocking, insurance), financing availability, governmental laws/regulations, economic/regulatory/political conditions affecting the industry, litigation, environmental damage, political events, vessel breakdowns, epidemics (e.g., COVID-19), impact of LIBOR discontinuance, and the ongoing Russian conflict with Ukraine and associated sanctions[53][54] - Potential consequences of Russian sanctions include limitations on SWIFT, counterparty performance issues, and general deterioration of the Russian economy, which could significantly impact the Partnership's business[54] Financial Statements (Appendix A) Condensed Consolidated Statements of Income The Condensed Consolidated Statements of Income show a decrease in Q4 2022 Net Income to $11.6 million from $16.9 million in Q4 2021, primarily influenced by changes in derivative instrument gains and increased interest costs. Full-year Net Income slightly increased to $54.0 million Condensed Consolidated Statements of Income (Selected Items, in thousands) | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Voyage revenues | $35,064 | $35,678 | $131,657 | $137,746 | | Vessel operating expenses | $(7,761) | $(8,169) | $(29,773) | $(29,640) | | Operating income | $16,244 | $16,730 | $45,337 | $64,611 | | Interest and finance costs, net | $(8,603) | $(5,315) | $(27,082) | $(21,420) | | Gain on Debt Extinguishment | $2,072 | $— | $2,072 | $— | | Gain on derivative instruments | $2,181 | $5,529 | $33,655 | $10,104 | | Net income | $11,618 | $16,941 | $54,010 | $53,260 | | Earnings per common unit (basic and diluted) | $0.24 | $0.38 | $1.15 | $1.14 | Consolidated Condensed Balance Sheets The Consolidated Condensed Balance Sheets show a slight decrease in total assets to $947.7 million as of December 31, 2022, from $965.5 million in 2021. Total liabilities decreased to $523.8 million, while total partners' equity increased to $423.9 million, reflecting debt reduction and improved common unitholders' equity Consolidated Condensed Balance Sheets (Selected Items, in thousands) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents and restricted cash | $79,868 | $97,015 | | Derivative financial instrument | $34,877 | $8,824 | | Vessels, net | $825,105 | $853,190 | | Total assets | $947,712 | $965,481 | | Total long-term debt, net | $497,033 | $561,966 | | Total liabilities | $523,781 | $583,997 | | Total partners' equity | $423,931 | $381,484 | | Common unitholders equity | $297,139 | $254,734 | Consolidated Condensed Statements of Cash Flows The Consolidated Condensed Statements of Cash Flows indicate a decrease in net cash from operating activities for Q4 2022 to $13.4 million, and for the full year to $57.3 million. Net cash used in financing activities increased, primarily due to higher debt repayments, resulting in a net decrease in cash and cash equivalents for both periods Consolidated Condensed Statements of Cash Flows (Selected Items, in thousands) | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net cash from Operating Activities | $13,423 | $20,997 | $57,324 | $79,591 | | Net cash used in Investing Activities | $(2,045) | $— | $(3,635) | $— | | Repayment of long-term debt | $(28,893) | $(12,000) | $(64,893) | $(48,000) | | Receipt/ (Payment) of derivative instruments | $4,329 | $(407) | $7,409 | $(1,385) | | Net cash used in Financing Activities | $(29,244) | $(15,298) | $(70,836) | $(57,555) | | Net increase / (decrease) in cash and cash equivalents | $(17,866) | $5,699 | $(17,147) | $22,036 | | Cash and cash equivalents and restricted cash at end of period | $79,868 | $97,015 | $79,868 | $97,015 | Non-GAAP Financial Reconciliations & Fleet Statistics (Appendix B) Fleet Statistics and Operational Definitions Appendix B provides key fleet statistics for Q4 and Full Year 2022, showing consistent 100% fleet utilization. It also defines operational metrics such as Calendar Days, Available Days, Revenue earning days, Time Charter Equivalent (TCE) rate, and Daily vessel operating expenses, along with their calculation methodologies Fleet Statistics (Q4 and Full Year 2022 vs 2021) | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------- | :------ | :------ | :------ | :------ | | Number of vessels at end of period | 6 | 6 | 6 | 6 | | Average number of vessels in period | 6 | 6 | 6 | 6 | | Calendar Days | 552.0 | 552.0 | 2,190.0 | 2,190.0 | | Available Days | 552.0 | 552.0 | 2,087.2 | 2,190.0 | | Revenue earning days | 552.0 | 552.0 | 2,087.2 | 2,190.0 | | Time Charter Equivalent rate | $62,239 | $63,620 | $61,660 | $61,684 | | Fleet Utilization | 100% | 100% | 100% | 100% | | Vessel daily operating expenses | $14,060 | $14,799 | $13,595 | $13,534 | - Fleet utilization is calculated by dividing Revenue earning days by Available Days, measuring efficiency in vessel employment[65] - Time Charter Equivalent (TCE) rate is a non-GAAP measure of average daily revenue performance, calculated by dividing total voyage revenues less voyage expenses by Available Days[66] Reconciliation of Net Income to Adjusted EBITDA This section provides a reconciliation of Net Income to Adjusted EBITDA, a non-GAAP measure used by management and investors to assess operating performance by excluding non-cash and non-recurring items. Adjusted EBITDA for Q4 2022 was $23.6 million, a decrease from $24.7 million in Q4 2021 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net income | $11,618 | $16,941 | $54,010 | $53,260 | | Net interest and finance costs | $8,603 | $5,315 | $27,082 | $21,420 | | Depreciation | $8,040 | $7,993 | $31,806 | $31,710 | | Gain on Debt Extinguishment | $(2,072) | $— | $(2,072) | $— | | (Gain)/ Loss on derivative financial instrument | $(2,181) | $(5,529) | $(33,655) | $(10,104) | | Dry-docking and special survey costs | $— | $— | $12,791 | $— | | Amortization of deferred revenue | $(435) | $(81) | $(675) | $222 | | Amortization and write-off of deferred charges | $54 | $55 | $216 | $501 | | Adjusted EBITDA | $23,627 | $24,694 | $89,503 | $97,009 | - Adjusted EBITDA is defined as earnings before interest and finance costs, gains/losses on derivative financial instruments, taxes, depreciation and amortization, dry-docking and special survey costs, and significant non-recurring items[71] - Adjusted EBITDA is a supplemental non-GAAP measure used to compare operating performance across periods and companies by excluding disparate financial items, depreciation, amortization, and taxes[72] Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS This section reconciles Net Income to Adjusted Net Income and Adjusted Earnings per common unit, both non-GAAP measures. Adjusted Net Income excludes non-recurring expenses, charter hire amortization, and changes in fair value of derivative financial instruments. For Q4 2022, Adjusted Net Income was $7.0 million, and Adjusted Earnings per common unit was $0.11 Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS (in thousands, except per unit data) | Metric | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net Income | $11,618 | $16,941 | $54,010 | $53,260 | | Amortization of deferred revenue | $(435) | $(81) | $(675) | $222 | | Amortization and write-off of deferred charges | $54 | $55 | $216 | $501 | | Dry-docking and special survey costs | $— | $— | $12,791 | $— | | Gain on Debt Extinguishment | $(2,072) | $— | $(2,072) | $— | | (Gain)/ Loss on derivative financial instrument | $(2,181) | $(5,529) | $(33,655) | $(10,104) | | Adjusted Net Income | $6,984 | $11,386 | $30,615 | $43,879 | | Less: Adjusted Net Income attributable to preferred unitholders and general partner | $(2,895) | $(2,899) | $(11,582) | $(11,595) | | Net Income available to common unitholders | $4,089 | $8,487 | $19,033 | $32,284 | | Weighted average number of common units outstanding | 36,802,247 | 36,802,247 | 36,802,247 | 36,504,120 | | Adjusted Earnings per common unit, basic and diluted | $0.11 | $0.23 | $0.52 | $0.88 | - Adjusted Net Income represents net income before non-recurring expenses, charter hire amortization related to escalating time charter rates, and changes in the fair value of derivative financial instruments[76] - Adjusted Earnings per common unit is calculated by dividing Net Income available to common unitholders by the weighted average common units outstanding[77]