Dynagas LNG Partners LP (DLNG) 2023 Q3 法說會逐字稿

Thank you for standing by ladies and gentlemen, and welcome to Dynagas LNG Partners conference call on the third quarter 2023 financial results. We have with us Mr. Tony Lauritzen, Chief Executive Officer, and Mr. Michael Gregos, Chief Financial Officer of the Company. (Operator Instruction) I must advise that this conference is being recorded today. Please be reminded that the Company announced its results for the press release that has been publicly distributed.

At this time, I would like to remind everyone that in today's presentation and conference call, Dynagas LNG Partners will be making forward-looking statements. These statements are within the meaning of the federal securities 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. 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, Dynagas Partners, LNG expectations are objectives regarding future and market charter rates stations and in particular, the effects of COVID-19 on the financial condition and operations of Dynagas Partners, LNG and LNG industry in general may be forward-looking statements such as defined in the 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 the full forward-looking statement and the same statement, which was also included in the press release. Please take a moment to go through the whole statement and read it.

And now I pass the floor to Mr. Lauritzen. Please go ahead, sir.

Good morning, everyone, and thank you for joining us in our three months ended September 30, 23 earnings conference call. I'm joined today by our CFO Michael Gregos, we have issued a press release announcing our results for the said period. Certain non-GAAP measures will be discussed in 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. We today present the results for the three month period ending on September 30, 2023. We are pleased to announce that all six LNG carriers in our fleet are operating under long-term charters with international gas companies. For the third quarter of '23, we reported net income of $1.4 million and a loss per common unit of $0.04. Our adjusted net income stood at $3.1 million, translating to adjusted earnings per common unit of $0.01. Furthermore, our adjusted EBITDA for the same period reached $20.4 million from an operational perspective, it was a busy period during which we completed the scheduled drydocking of the Yenisei River, Lena River and Arctic Aurora, including installation of ballast water treatment equipment in accordance with current regulations. Also, the Arctic Aurora was delivered to her new time charter party agreement with Equinor ASA in September 2023. Investment has been continuously on charter with Equinor since she was delivered from her builders in 2013.

I will now turn the presentation over to Michael, who will provide you with further comments to the financial results.

Thank you, Tony. Turning to Slide 4. Net income for the fourth quarter decreased by $6 million or 81% to $1.4 million compared to $7.4 million in Q3 2022, primarily due to the decrease in the unrealized gain on our interest rate swap of $13 million and the increase of $2.2 million in loan interest, which were partially offset by the increase in the realized gain on our swap transaction of $3.9 million.

Net income for this quarter was also impacted by the scheduled five year special survey drydocking of the Arctic Aurora, Lena River and Yenisei River, which commenced and were completed within the third quarter and resulted in an increase of $9.8 million in dry docking and special survey costs, which was, however, offset by the fact that under the time charter contracts for two of our LNG carriers, the time charters paid with a special survey and drydock costs on a pass through basis. Therefore, out of the total drydock and special survey costs of $17.3 million for the quarter, $11.6 million was reimbursed from the time charters to the Company and which has been reported in a separate line item in the P&L statement, revenues from contracts with customers. In addition, the three aforementioned vessels which will drive growth remain on higher for 56 days out of the total 110 dry-dock days for the quarter as per the provisions of their respective time charter parties.

Similarly, although we experienced an increase in OpEx of $3.6 million versus the same period last year. $3 million of this increase relates to two LNG carriers, which are contracted on an OpEx pass-through basis, meaning that for these two LNG carriers, there was a corresponding increase of $3 million in voyage revenues. It is noteworthy to point that compared to Q3 2022. voyage revenues increased by 23.7% from $29.9 to $37 million, mainly attributable to increase of $2.7 million due to the deferred revenue amortization relating to the new time charter party agreement with Equinor for the employment of the Arctic Aurora, which commenced in September 2023 and the higher available days.

Adjusted EBITDA for the third quarter was relatively stable at $20.4 million and TCE for the quarter amounted to close to $72,000 per day. The elevated TCE relative to prior quarters is mainly due to the increase in variable revenues of the two LNG carriers contracted on OpEx pass-through basis, as explained before, as well as the aforementioned noncash straight-line deferred revenue amortization, which is reconciled with actual cash revenue received in the cash flow statement.

OpEx for the first quarter amounted to $19,200 per day per vessel cash breakeven for the quarter of $50,200 per day, excluding distributions to preferred unitholders and including the realized gains from the interest rate swap.

Adjusted net income for the quarter for the third quarter of 2023 amounted to $3.1 million compared to $4.5 million, same time last year. The decrease being mainly attributable to the aforementioned increase in interest and finance costs as a result of the higher interest expense paid under the floating leg of our credit facility. Adjusted net income excludes cash receipts and unrealized gains on our interest rate swap. If we include that this quarter's realized gain from our interest rate swaps of $6.5 million. As can be seen in the cash flow statement, adjusted net income would have amounted to $9.6 million or $0.18 per common unit instead of $0.01.

Moving to Slide 4. As of the end of September 2023, we had $432 million debt outstanding under our current credit facility. We are continuing our comprehensive deleveraging path, which commenced in the first quarter of 2020, resulting in a decrease in our net leverage to 4.1 times and a steady increase in the book value of our equity, which today stands at $441 million. In this quarter, we generated $21 million in operating cash flow.

Turning to Slide 6. Our cash balance for the quarter increased from $52.9 million at the end of the previous quarter to $64.9 million. And our credit metrics continue to improve. It should be noted, however, that current liabilities in this quarter increased by $10.3 million due to the increase in payables, mainly associated with the three vessels drydocks and which are expected to decrease in the next quarters.

With respect to our debt maturity in September 2024, we are currently in discussions for the refinancing of our current credit facility, which we hope to sign close and fund within the first quarter of 2024.

That wraps it up from my side.

Thank you, Michael. And let's move on to Slide 7 of the presentation. And at present, our fleet consists of six LNG carriers with an average age of approximately 13.3 years. Our current charters include gas companies such as Equinor of Norway, SEFE and Yamal Trade of Singapore as well as Rio Grande LNG, a subsidiary of next decade for the forward chartered vessels, Clean Energy and Arctic Aurora. As of December 7, 2023, the fleet's contract backlog amounts to approximately $1.16 billion, equating to an average backlog of about $193 million per vessel. Furthermore, the fleet enjoys an average remaining charter period of approximately 7.2 years. We are confident that our charter profile is strong and positions our partnership with stable income in the years to come.

Moving on to Slide 8, our commercial strategy of securing long-term charters with gas companies. We have built a solid contracts and backlog and by no unforeseen events, we have no contractual vessel availability until 2028 when the Clean Energy, Ob and Amur River will be available..

The next availability after this is the Arctic Aurora, which will come off our Rio Grande LNG contract from 2023, followed by anything and then a river in 2034, provided that Charter has extension options are not exercised according to furnish current liquefaction capacity is approximately $473 million per annum with another $205 million tons per annum of additional LNG liquefaction capacity already FID'd and under construction plus part of prior to 2030. This represents a total increase in LNG liquefaction capacity of about 40%. Approximately 40% of this expansion will come from U.S. export projects, 25% from Qatar and remaining 35% will be split between various projects including Russia, Africa, Australia, Canada and Mexico.

Additionally, there are a number of expansion projects in the US Gulf of Mexico and elsewhere at different stages of taking FID. The current LNG carrier fleet counts about 630 vessels. The order book stands at 46%, excluding slot reservations made for Qatar Phase 2 and come up and big LNG and 56%. If we assume that those slot reservations, they will materialize. It is interesting to note that only 23 vessels of the order book and not connected to the time charter, although the increase in the fleet capacity is well above the increase in liquefaction capacity. So we believe that older and smaller vessels in particular vessels under 140,000 cubes, representing about 17% of the global LNG carrier fleet will be phased out in any case. We see that from time to time. And what we see that from time to time in the industry is that energy carriers under constructions are delivered on time, while LNG trains under constructions are delayed. Therefore, we have engineered our topical portfolio so that we are fully employed throughout 2027 in order to eliminate our exposure to any potential market uncertainty during part of this period.

Moving on to Slide 9. The partnership has demonstrated its commitment to debt reduction strategy. Since December 2019 until end of September 23, with effects, we successfully repaid $242 million impact, significantly lowering the net leverage from 6.6 times to 4.1 times. Additionally, the partnership have achieved a 42% increase in book equity value standing at $441 million as per 30 September '23.

Looking ahead, we are confident that the partnership's ongoing efforts to reduce debt with further augment equity value through stable long-term cash flow visibility. We firmly believe the energy plays a pivotal role in building the future with reduced emissions. The demand for LNG is projected to continue as the world progressively shifts away from coal and other polluting fossil fuels in favor of cleaner energy sources. Natural gas has a relatively low emission profile. And combusted and other key drivers of natural gas is its ability to generate power swiftly and effectively as and when needed and the existence of a well-developed global infrastructure facilitating its production, transportation, storage and consumption, particularly these promising developments. In fact, we maintain a positive outlook on the long-term prospects of energy LNG shipping.

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

Thank you. (Operator Instruction) Our first question comes from the line of Ben Nolan with Stifel. Please proceed with your question.

Hi, thanks Tony, Michael, I really just have one the -- asit relates to refinancing of the debt and it's been something I know that you guys have been working on for quite a while and I appreciate that. It sounds like it's a 1Q type of event. I guess my question is what's-- has been as a whole have been something on your side? or maybe that is a little bit more challenging to get banks to underwrite with the with the Yamal vessels in there? Any color as to sort of what the -- why its taking too long?

No, I don't think that the challenging is the right word. We're trying to find the optimal there is demand for financing our vessels. So I don't I wouldn't say there's a holdup and we've been working on it for some time. And you know, it looks like we're going for our conclusion.

Okay. And so that Yamal stuff isn't really a factor or a problem?

Well, I mean, listen, our -- we have -- if you look at our whole fleet, we have a strong contract backlog if you look at it in its totality. So there are there aren't that many interesting LNG projects out there in the market to be financed by banks. So, you know, I can tell you that no, there is demand for what we have to offer. It also has to be something that fits our needs.

Sure. All right. I appreciate it. Thank you.

Thank you, there are no other questions at this time. I'll turn the floor back to Mr. Lauritzen.

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

Thank you. This concludes today's conference call. You may disconnect. Your lines at this time. Thank you for your participation.