Dynagas LNG Partners Q2 2023 Earnings Call Transcript

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Provided by Quartr
September 15, 2023

There are 3 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to Dynagas LNG Partners Conference Call on the Second Quarter of 2020 3 Financial Results. We have with us today Mr. Tony Lardon, Chief Executive Officer and Mr. Michael Grados, Chief Financial Officer of the company. At this time, all participants are in a listen only mode.

Speaker 1

There will be

Operator

a presentation followed by a question and answer session. And wait for your name to be announced. I must advise you that this conference call is being recorded today. Please Be reminded that the company announced its results with a press release that has been publicly distributed. At this time, I would like to remind everybody that in today's presentation and conference call, Dynagas LNG Partners we'll be making forward looking statements.

Operator

These statements are within the meaning of the federal security laws. This conference call and slide presentation of the webcast contains certain forward looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The statements in today's conference call that are not historical facts, including among other things the expected financial performance of DynaGas LNG Partners Business, DynaGas Partners LNG ability to pursue growth opportunities, DynaCash Partner LNG expectations or objections objectives regarding future and market charter rate expectations, in particular the effects of COVID-nineteen on the financial condition and operations of DynaGas Partners LNG and LNG Industry in general, may be forward looking statements as such defined in Section 21E of the Securities Exchange Act of 1934 as amended. Matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide 2 of the webcast presentation, which has full forward looking statement and the same statement was also included in the press release.

Operator

Please take a moment to go through the whole statement and read it. And now I will pass the floor over to Mr. Larsen. Please go ahead sir.

Speaker 1

Good morning, everyone, and thank you for joining us in our 3 months ended 30 June, 2023 earnings conference call. I'm joined today by our CFO, Michael Gregos. We have issued a press release announcing our results for the set period. Certain non GAAP measures will be discussed on this call And we have provided a description of those measures as well as a discussion of why we believe this information to be useful in our press release. Let's move to slide 3 of the presentation.

Speaker 1

We are pleased to present the results for the 3 month period ending on June 30, 2023. We are pleased to announce that all 6 7 gs carriers in our fleet were operating under long term charters for the esteemed international gas companies. In the Q2 of 2023, our net income amounted to $14,400,000 with earnings per common unit reaching $0.31 Our adjusted net income stood at $5,800,000 translating into adjusted earnings per common unit of $0.08 Furthermore, our adjusted EBITDA for the same period reached $23,000,000 The fixed utilization was 91.7%, which was due to an unscheduled repair of the vessel of River. The partnership ended into new town child party agreements for the clean energy and the Arctic Aurora with Rio Grande LNG LLC, a subsidiary of NextDecade Corporation adding approximately $270,000,000 to the partnership's revenue backlog. The Clean Energy has been employed for a time charter period of about 2 years and the Oxy Corolla has been employed for a time charter period of about 7 years, both charters commencing in 2026, post our current charters.

Speaker 1

I will now turn the presentation over to Michael, who will provide you with further comments to the financial results. Thank you, Jeremy. Turning to slide 4. Net income for the Q2 increased by $3,300,000 or 30 percent to $14,400,000 compared to $11,100,000 in Q2 2022, primarily due to the decrease of $2,400,000 dry docking and special survey costs attributable to the scheduled dry docks of the Clean Energy And the Amal River, which were completed in April July 2022 respectively, The increase of $3,600,000 in the deferred revenue amortization relating to the new time charter party agreement with Equinor For the new employment of the Arctic Aurora, which will commence in September 2023 and the increase in the realized gain on our interest 2.2 a swap transaction of $5,300,000 which was partially offset due to changes in the unrealized gain on our interest rates were $4,800,000 The above was partly offset by the increase of $3,200,000 in the interest and finance costs, which effectively were offset with the above mentioned increase in the realized gain or cash received on our interest rate swap. Utilization for the quarter was 91.7% due to unscheduled repairs of the Ob River, which is expected to be partly covered under the vessels hollow machinery and loss of higher insurances and the net effect on the partnership's results for the quarter is approximately $400,000 Adjusted net income for the Q2 23 amounted to RMB5.8 million compared to RMB9.1 million same time last year, The decrease being mainly attributable to the $3,200,000 increase in interest rate and finance costs as a result of the higher interest expense paid under the floating leg of our credit facility.

Speaker 1

For consistency with prior quarters, adjusted net income excludes cash receipts and unrealized gains on our interest rate swap. If we include the fiscal quarter's realized gain from our interest rate swap of $6,100,000 as can be seen in the cash flow statement, Adjusted net income would have amounted to $12,000,000 or $0.25 per common unit instead of $0.08 Adjusted EBITDA for the Q2 was relatively stable at $23,000,000 as compared to $22,900,000 last year. TCE for the quarter amounted to $67,489 per day per vessel. The elevated TCE Relative to prior quarters is due to the non cash straight line deferred revenue amortization related to the new contract of the Arctic Aurora with Equinor and which has reconciled to the actual cash revenue receipts in the cash flow statement. OpEx for the 2nd quarter amounted to $14,824 per day With the 4th vessel, cash breakeven for the quarter of $46,900 per day excluding distributions to preferred unitholders and including the realized gain from the interest rates law.

Speaker 1

Turning to slide 5. As of the end of June 2023, we have $444,000,000 debt outstanding. We are continuing our comprehensive deleveraging path, which commenced in the Q1 of 2020 resulting in a decrease in our net leverage to 4.3 times from 6.6 times and a steady increase in the book value of our equity. For the quarter, we generated $8,800,000 in operating cash 2 equivalent to operating cash flow of about $0.24 per common unit. Again, please remind us that this excludes $6,100,000 in realized swap gains.

Speaker 1

Moving on to slide 6, our cash balance for the quarter remained stable at 53,000,000 And our credit metrics continue to improve. Subsequent to June 30th, we have 3 LNG carriers passing the EUR10 special surveys and installation of the ballast water treatment system. The Genesee River has completed a special survey in the 3rd quarter And the Arctic Aurora and Lena River both commenced a special service in dry books, which are currently underway. That wraps it up on my side. I will pass the presentation over to Tony.

Speaker 1

Thank you, Michael. Let's move on to slide 7 of the presentation. At present, our fleet consists of 6 LNG carriers with an average age of approximately 13.1 years. Our current charters include prominent companies such as Equinor of Norway, Sepe and Yamaltrade of Singapore, as well as Rio Grande LLC, a subsidiary of NextDecade for the forward charter vessels Clean Energy and Optical Lola. As of today, 15th September 23, the fleet contracted backlog amounts for approximately €1,200,000,000 equating to an average backlog of about €200,000,000 per 4.

Speaker 1

Furthermore, the fleet enjoys an average remaining charter period of approximately 7.4 years. We are confident that our charter profile is strong and positions our partnership for stable income in the years to come. Moving on to slide 8. Our strategy is centered on securing long term charters with LNG producers. As previously mentioned in this presentation, Our partnership has recently entered into a new time charter client agreement for 2 of our vessels, namely the team Energy and Rakitic Aurora with Rio Grande LNG, LLC, a subsidiary of Nextel Corporation.

Speaker 1

The Clean Energy has been employed for approximately 2 years Set to commence between March May 26 immediately following the expiration of existing SunTrust with sector markets in the trading. Simulated last week, Aurora has been employed for approximately 7 years scheduled to commence between September November 26, from the expiration of the existing franchise with Equinor. We are delighted with these new agreements, which have added approximately $270,000,000 to our contracted Limesaro backlog. The earliest contracted redelivery date for any of our fixed LNG carriers It's in 2028 for the Clean Energy, the Old River and the Almer River. So notwithstanding any unforeseen events and schedules that will fly dockings.

Speaker 1

Our fleet is now employed throughout 2027. Let's move to slide 9. The partnership has demonstrated its commitment to its debt reduction strategy. Since September 2019 until June 23, We successfully repaid $230,000,000 in debt, significantly lowering its net leverage from 6.6 times to 4.3 times. Additionally, the partnership has achieved a 42% increase in book equity value, standing at $442,200,000 as of 30 June 2023.

Speaker 1

Looking ahead, we are confident that the partnership's ongoing efforts to reduce debt will further augment equity value through stable long term cash We have a strong belief that LNG plays a pivotal role in shaping a future market by a surge in energy demand and a need to manage emissions. The demand for LNG is expected to persist as the global population continues to grow, shipping standards improved and it was progressively shipped away from coal and other polluting fossil fuels in favor of cleaner energy sources. Furthermore, the long term outlook for LNG shipping remains robust. These rates are underpinned by sustained demand for LNG shipping, driven by long term SPAs and countries striving to enhance our energy security and mitigate price volatility. In light of these promising developments, we maintain a positive outlook for the prospects of LNG shipping.

Speaker 1

Thank you for your We now have concluded the presentation and invite you to ask any questions you may have. Thank you.

Operator

Thank Securities. Our first question is from Ben Nolan with Stifel. Please proceed.

Speaker 1

Hi, Jim.

Speaker 2

So really my only question is, I believe that the current credit facility It's about a year from now and would come current It would be shown as a current liability. Curious where things stand with respect to refinancing that. Is this given where interest rates are, are you 2. Waiting until it is close to or at maturity just Because of the delta and interest rates between what you have and what you could or would be paying or I don't know. I don't want to

Speaker 1

put words in your

Speaker 2

What's the plan on the credit facility?

Speaker 1

Yes. Hi, Ben. No, we are in Discussions, it's not something that we want to leave for the last minute. In any case, the swap can run. It doesn't have to be back to back to the existing loans.

Speaker 1

So we are in active discussions. We do see demand for LNG projects From our financial institutions. I can't comment on the time line, but I can tell you this is a live project.

Speaker 2

Okay. And as you are can you maybe give some sense as to how you're thinking about what the new financing would Look like is this similar term debt? Have Have you gotten any sense as to sort of where the assuming there will be some incremental interest costs How you think about what that would look like?

Speaker 1

Well, listen, let me just tell Obviously, we're in a much better position today compared to where we were in 2019 when we did our Credit facility. What I can say is that we're in a much better position to discuss the dividend to common unitholders. So our objective I can't give you any other further information, but our objective is For any new financing facility not to have a prohibition of dividends to the common unitholders Similar to what our credit current facility has and we believe this is a reasonable ask given where we are today.

Speaker 2

Okay. And maybe any does any construct around The appetite of the lenders, is this are you finding it To be a broad age of interest from people to provide the capital?

Speaker 1

As I said before, we do see interest from banks and financial The company has very good contract coverage. Yes, Mary. There seems to be interest. Yes. Okay.

Speaker 2

All right. I appreciate it. Thank you.

Operator

Thank you very much. Thank you. That is all the questions we have for today. I would like to turn the Conference back over to Tony for closing remarks.

Speaker 1

We appreciate your time and attentiveness. Thank you for your participation and look forward to connecting with you again on our next call. Take care and goodbye.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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Key Takeaways

  • Dynagas reported a Q2 2023 net income of $14.4 million (EPS $0.31) and adjusted EBITDA of $23 million, reflecting strong operating performance.
  • Fleet utilization for the quarter was 91.7%, with a $400,000 net impact from an unscheduled repair on the Ob River vessel.
  • The partnership secured two new long-term charters for Clean Energy and Arctic Aurora commencing in 2026, adding approximately $270 million to its contracted revenue backlog.
  • Since Q1 2020, Dynagas has reduced net leverage from 6.6× to 4.3× and grown book equity by 42%, underlining its ongoing deleveraging strategy.
  • The company is in active discussions to refinance its credit facility, aiming to preserve dividend capacity and capitalize on strong lender interest in LNG projects.
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Earnings Conference Call
Dynagas LNG Partners Q2 2023
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