Dynagas LNG Partners L.P. Reports Results for the Three and Nine Months Ended September 30, 2014

Dynagas LNG Partners LP, an owner and operator of LNG carriers, announced results (unaudited) for the three and nine months ended September 30, 2014.

Three and Nine months ended September 30, 2014 Highlights:

Net income for the three and nine months ended September 30, 2014 of $14.0 million and $35.2 million, respectively, an increase of 17.8\% and 1.8\% respectively over the same periods in 2013;
Adjusted Net Income(1) for the three and nine months ended September 30, 2014 of $14.3 million and $37.0 million, respectively, an increase of 37.7\% and 22.1\% respectively over the same periods in 2013;
Distributable Cash Flow(1)during the three and nine month periods ended September 30, 2014 of $16.3 million and $41.2 million, respectively, an increase of 40.1\% and 21.6\% respectively, from the same periods in 2013;
Adjusted EBITDA(1) for the three and nine month periods ended September 30, 2014 of $22.6 million and $56.1 million respectively; an increase of 40.8\% and 18.7\% respectively, from the same periods in 2013;
Adjusted Earnings per common unit(1) for the three and nine month periods ended September 30, 2014 of $0.40 and $1.20, respectively.

(1)Adjusted Net Income, Adjusted EBITDA, Adjusted Earnings per common unit and Distributable Cash Flow are not recognized measurements under U.S. GAAP. Please refer to the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Recent Developments:

Quarterly Cash Distribution: On October 22, 2014, the Partnership announced that its Board of Directors (the “Board”) declared a quarterly cash distribution for the third quarter of 2014 of $0.39 per unit, representing a 6.8\% increase over the Partnership’s minimum quarterly distribution of $0.365 per unit, established at the time of the Partnership’s initial public offering of common units (“IPO”) and reflected in the Partnership’s partnership agreement, and reflects the contribution to operating results for a full quarter of the 2013 built LNG carrier Arctic Aurora. This cash distribution is scheduled to be paid on or about November 12, 2014, to all unitholders of record as of November 5, 2014. As of November 10, 2014, the Partnership had 20,505,000 common units, 14,985,000 subordinated units and 35,526 general partner units issued and outstanding.

Public offering of $250 million Senior Unsecured Notes due 2019 (the “Notes”): On September 15, 2014, the Partnership completed a $250 million offering of senior unsecured notes due 2019. The Notes bear interest from the date of the original issue until maturity at a rate of 6.25\% per year, payable quarterly in arrears on October 30, January 30, April 30 and July 30 of each year. The net proceeds from the Notes offering were used to finance the majority of the acquisition price of the Yenisei River discussed below.

Completion of the acquisition of the LNG carrier Yenisei River: On September 25, 2014, the Partnership completed its previously announced acquisition from Dynagas Holding Ltd. (our “Sponsor”) of 100\% of the ownership interests in the entity that owns and operates the Yenisei River, a 2013 built 155,000 cubic meter (cbm) ice class LNG carrier, for an aggregate purchase price of $257.5 million. As part of this acquisition, the Partnership acquired the Yenisei River and the related time charter. All of the other assets and liabilities relating to the Sponsor entity that owns the Yenisei River did not form part of the purchase price and were assumed by other Sponsor entities as the case may be. The acquisition was funded with the net proceeds of its recently completed $250 million senior unsecured notes public offering discussed above and cash on hand. As of November 10, 2014, following the acquisition of the Yenisei River, the Partnership’s fleet consisted of five LNG carriers with an average age of 4.9 years and an aggregate carrying capacity of 759,100 cbm. Following this acquisition, the Management of the Partnership intends to recommend to the Board a further increase to the Partnership’s quarterly cash distribution of between $0.030 and $0.035 per unit, which, if approved by the Board, would become effective for the distribution for the quarter ending December 31, 2014 and would represent a quarterly cash distribution of between $0.42 per unit and $0.425 per unit. Management can provide no assurance that it will make such recommendation, and if such recommendation is made, that it will be approved by the Board.

Management Commentary:

Tony Lauritzen, CEO of the Partnership commented: “We are pleased to report the Partnership’s earnings for the third quarter of 2014, which were within our expectations. In particular, we are focused on the performance of our fleet from a safety, operational and technical point of view. During this past quarter we had 100\% fleet utilization, which is reflected in our financial results.

“We have previously stated that we would be focused in 2014 on operational efficiency and growth. We believe our operating costs are competitive due to our management and operational efficiency and continued to implement our growth strategy through the acquisition of the Yenisei River. So far in 2014, we have increased the size of our fleet by approximately 69\% on a cubic meter capacity basis, which has enabled us to pay increased cash distributions to our unitholders. Following the acquisition of our fifth LNG carrier, we intend to recommend to the Board a quarterly cash distribution of between $0.42 per unit and $0.425 per unit with respect to the quarter ending December 31, 2014, which, if approved by the Board, would represent a cash distribution per unit increase of approximately 15\% since our IPO approximately twelve months ago.

“With our fleet fully contracted through 2016, we continue to focus our attention on further fleet growth and safe and efficient operations. The fleet of five LNG carriers (the “Optional Vessels”) currently owned by our Sponsor, provides us with an identified source of growth. In addition, the expertise and technical capabilities of our Manager, Dynagas Ltd., support our strategy of maintaining safe and efficient operations for our LNG Carriers. I look forward to working with our team in an effort to meet all of our goals.”

Three months ended September 30, 2014 and 2013 Financial Results

The Partnership reported net income of $14.0 million for the three months ended September 30, 2014, as compared to $11.9 million in the corresponding period of 2013, representing an increase of $2.1 million, or 17.8\%. Excluding the non-cash items presented in Appendix B, Adjusted Net Income for the three months ended September 30, 2014 was $14.3 million, compared to Adjusted Net Income of $10.4 million for the corresponding period in 2013, representing an increase of $3.9 million, or 37.7\%. Operating income for the three month period ended September 30, 2014 was $17.4 million, compared to $14.1 million in the corresponding period of 2013, representing an increase of $3.2 million, or 22.9\%.

Adjusted EBITDA (which is non-GAAP measure used as a supplemental financial measure by management and external users of financial statements, such as our investors, to assess our operating performance) for the three months ended September 30, 2014 was $22.6 million compared to $16.0 million for the corresponding period of 2013, representing an increase of $6.5 million, or 40.8\%.

The Partnership’s Distributable Cash Flow for the three-month period ended September 30, 2014 was $16.3 million. Distributable Cash Flow is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions. Please refer to the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Voyage revenues increased to $28.8 million for the three-month period ended September 30, 2014, as compared to $21.6 million for the same period in 2013,the increase being exclusively attributable to the addition in the Partnership’s fleet of the LNGs carriers Arctic Aurora and Yenisei River on June 23, 2014 and September 25, 2014, respectively. During the three-month period ended September 30, 2014, our fleet Available days increased to 373.5 days, compared to 276 Available days during the three month period ended September 30, 2013.

Vessel operating expenses increased by 64.1\% to $4.6 million in the three-month period ended September 30, 2014 compared to $2.8 million for the same period in 2013, mainly due to the operation of the Arctic Aurora and Yenisei River, the two LNG carriers we acquired from our Sponsor on June 23, 2014 and September 25, 2014, respectively, and increased crew costs. In this regard, daily operating expenses were $12,414 per LNG carrier during the three months ended September 30, 2014 from $10,254 per LNG carrier in the corresponding period of 2013. Similarly impacted from the aforementioned acquisitions by an aggregate $1.7 million were the Partnership’s management fees and depreciation expense for the three month period ended September 30, 2014.

The Partnership’s operating results were also impacted by increased general and administrative costs of approximately $0.3 million, mainly due to additional fees and expenses as a result of being a public company since November 2013.

The overall financial performance of the Partnership in the periods discussed reflected also the increase in the weighted average interest rate as well as weighted average outstanding indebtedness in the three months ended September 30, 2014 as compared to the corresponding period of 2013 that resulted in an approximate $1.3 million increase in the Partnership’s interest and finance costs.

The Partnership reported average daily hire gross of commissions on a cash basis(1) of approximately $78,250 per day per vessel in the three months ended September 30, 2014, compared to approximately $72,400 in the same period of 2013. During both three month periods ended September 30, 2014 and 2013, all of the Partnership’s vessels operated at 100\% utilization.

(1)Average daily hire gross of commissions on a cash basis represents voyage revenue on a cash basis, without taking into consideration the non-cash time charter amortization expense, divided by the Available Days in our fleet as described in Appendix B.

Amounts relating to variations in period-on-period comparisons shown in this section are derived from the condensed financials presented below.

Nine Months ended September 30, 2014 and 2013 Financial Results

The Partnership reported net income attributable to unitholders of $35.2 million for the nine months ended September 30, 2014, as compared to $34.6 million in the corresponding period of 2013, representing an increase of $0.6 million, or 1.8\%. Excluding the non-cash items presented in Appendix B, Adjusted Net Income for the nine months ended September 30, 2014 was $37.0 million, compared to Adjusted Net Income of $30.3 million for the corresponding period in 2013, representing an increase of $6.7 million, or 22.1\%. Operating income for the nine months ended September 30, 2014 was $42.5 million, compared to $41.4 million in the corresponding period of 2013, representing an increase of $1.1 million, or 2.6\%.

Adjusted EBITDA for the nine month period ended September 30, 2014 was $56.1 million compared to $47.2 million for the comparative period of 2013, representing an increase of $8.8 million, or 18.7\%.

The Partnership’s Distributable Cash Flow for the nine months ended September 30, 2014 was $41.2 million. Distributable Cash Flow is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions. Please refer to the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.

Voyage revenues increased to $70.7 million for the nine-month period ended September 30, 2014, as compared to $64.0 million for the same period in 2013 as a result of the above discussed acquisitions from our Sponsor that took place on June 23, 2014 and September 25, 2014, respectively. During the nine-month period ended September 30, 2014, our fleet Available days increased to 924 days, compared to 819 Available days during the nine month period ended September 30, 2013.

Vessel operating expenses increased by 23.9\% to $11.2 million in the nine-month period ended September 30, 2014 compared to $9.1 million for the same period in 2013, mainly reflecting the partial operation of the two LNG carriers recently acquired from our Sponsor on June 23, 2014 and September 25, 2014, discussed above, and slightly increased operational costs.

Daily operating expenses were $12,138 per LNG carrier during the nine months ended September 30, 2014 from $11,065 per LNG carrier in the corresponding period of 2013. No special survey and dry-dock repairs were incurred on any of our LNG carriers in the periods under discussion.

During the nine months ended September 30, 2014, the Partnership incurred $1.4 million of general and administrative costs versus $0.1 million in the corresponding period of 2013.

During the nine months ended September 30, 2014, the Partnership’s results were also impacted by the higher levels of weighted average interest and commitment fees under our existing and previous credit facilities that increased the Partnership’s interest and finance costs by approximately $0.7 million.
Full Report

Source: Dynagas LNG Partners