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Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ].
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ].
Attached as Exhibit 99.1 to this Report
on Form 6-K is management's discussion and analysis of financial condition and results of operations and interim unaudited consolidated
financial statements for the six months ended June 30, 2021 of Dynagas LNG Partners LP (the "Partnership").
The information contained in this Report
on Form 6-K is hereby incorporated by reference into the Partnership’s registration statement on Form F-3 (File No. 333-240014)
that was filed with the U.S. Securities and Exchange Commission with an effective date of August 19, 2020.
This Report on Form 6-K, and the documents
to which the Partnership refers in this Report on Form 6-K, as well as information included in oral statements or other written statements
made or to be made by the Partnership, contain statements that, in the Partnership's opinion, may constitute forward-looking statements.
Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates," "projects," "likely,"
"would," "could," "seek," "continue," "possible," "might," "forecasts,"
"will," "may," "potential," "should," and similar expressions are forward-looking statements.
Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their
potential effects on the Partnership and involve known and unknown risks and uncertainties. These forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which
are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements.
Accordingly, these forward-looking statements should be considered in light of the information included in this Report on Form 6-K and
the information under the heading "Item 3. Key Information—D. Risk Factors" set forth in the Partnership's Annual Report
on Form 20-F for the year ended December 31, 2020, which was filed with the Commission on April 29, 2021, or our Annual Report.
In addition to important factors and
matters discussed, or referred to, elsewhere in this Report on Form 6-K, important factors that, in our view, could cause our actual results
to differ materially from those discussed in the forward-looking statements include:
We undertake no obligation, and specifically
decline any obligation, to update any forward-looking statement to reflect events or circumstances after the date on which such statement
is made or to reflect the occurrence of unanticipated events, except as otherwise required by applicable law. New factors emerge
from time to time, and it is not possible for us to predict all of these factors which may adversely affect our results. Further,
we cannot assess the effect of each such factor on our business or the extent to which any factor, or combination of factors, may cause
actual results to be materially different from those contained in any forward-looking statement. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking statements.
We make no prediction or statement about
the performance of our units or our debt securities. The various disclosures included in this Report on Form 6-K and in our other filings
made with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our
business, prospects and results of operations should be carefully reviewed and considered.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: September 16, 2021
|
DYNAGAS LNG PARTNERS LP
|
|
|
|
|
By:
|
/s/ Tony Lauritzen
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|
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Name:
|
Tony Lauritzen
|
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Title:
|
Chief Executive Officer
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial
condition and results of operations of Dynagas LNG Partners LP for the six month periods ended June 30, 2021 and 2020. Unless otherwise
specified herein, references to the “Partnership,” “we,” “our” and “us” or similar terms
include Dynagas LNG Partners LP and its wholly owned subsidiaries; references to Dynagas LNG Partners LP include Dynagas LNG Partners LP and
not its subsidiaries; and references to our “Sponsor” include Dynagas Holding
Ltd. and its subsidiaries. Our Sponsor is beneficially owned by the chairman of our Board of Directors, Mr. Georgios Prokopiou, and members
of his family. References to our “General Partner” are to Dynagas GP LLC, an entity owned and controlled by our Sponsor, and
references to our “Manager” are to Dynagas Ltd., which is wholly owned by Mr. Georgios Prokopiou. All references in this report
to “Gazprom,” “Equinor” and “Yamal” refer to Gazprom Marketing and Trading Singapore Pte Ltd, Equinor
ASA (formerly known as Statoil ASA) and Yamal Trade Pte. Ltd. respectively and certain of their respective subsidiaries or affiliates,
which are our current or prospective charterers.
You should read the following discussion and
analysis together with the unaudited interim condensed consolidated financial statements and related notes included elsewhere in this
report. Amounts relating to percentage variations in period-on-period comparisons shown in this section are derived from such unaudited
interim condensed consolidated financial statements. The following discussion contains forward-looking statements that reflect our future
plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties
that may be outside our control, which could cause actual events or conditions to differ materially from those currently anticipated,
expressed or implied by such forward-looking statements. Please see our Annual Report on Form 20-F for the year ended December 31, 2020,
which was filed with the U.S. Securities and Exchange Commission, or the Commission, on April 29, 2021, and our other filings with the
Commission, which contain additional information relating to our management’s discussion and analysis of financial condition and
results of operation and a more complete discussion of the risks and uncertainties referenced in the preceding sentence.
Business Overview and Development of the
Partnership
Since our initial public offering
(“IPO”) in November 2013, we have been a growth-oriented limited partnership focused on owning and operating liquefied
natural gas (“LNG”) carriers and have grown our fleet (our “Fleet”) from three vessels at the time of our
IPO to our current fleet of six vessels with our last vessel acquisition in 2015. As a result of the
significant challenges facing the midstream energy master limited partnership industry, our cost of equity capital has
remained elevated for a prolonged period, making the funding of new acquisitions challenging. All of the vessels in our Fleet are
currently contracted on time charters with international energy companies, including Gazprom, Equinor and Yamal, which we expect to
provide us with the benefits of fixed-fee contracts, predictable cash flows and high utilization rates.
We are currently focusing our capital allocation
on debt repayment and prioritizing balance sheet strength, in order to reposition the Partnership for potential future growth if our
cost of capital allows us to access debt and equity capital on acceptable terms. As a result, if we are able to raise new debt or
equity capital on terms acceptable to the Partnership in the future, we intend to leverage the reputation, expertise and
relationships with our charterers, our Sponsor and our Manager in growing our core business and potentially pursuing further
business and growth opportunities in transportation of energy or other energy-related projects, including, without limitation,
floating storage regassification units, LNG infrastructure projects, maintaining cost-efficient operations and providing reliable
seaborne transportation services to our current and prospective charterers. In addition, as opportunities arise, we may acquire
additional vessels from our Sponsor or from third-parties and/or engage in investment opportunities incidental to the LNG or energy
industry. In connection with such plans for growth, we may enter into additional financing arrangements, refinance existing
arrangements or arrangements that our Sponsor, its affiliates, or such third party sellers may have in place for vessels and
businesses that we may acquire, and, subject to favorable market conditions, we may raise capital in the public or private markets,
including through incurring additional debt, debt or equity offerings of our securities or in other transactions. However, we cannot
assure you that we will grow or maintain the size of our Fleet or that we will pay the per unit distributions in the amounts that we
have paid in the past or at all or that we will be able to execute our plans for growth.
As of
the date of this report, we have outstanding 36,802,247 common units, 35,526 general partner units, 3,000,000 9.00% Series A
Cumulative Redeemable Preferred Units, or the “Series A Preferred Units”, and 2,200,000 8.75% Series B Fixed to Floating
Cumulative Redeemable Perpetual Preferred Units, or the “Series B Preferred Units.” Our Sponsor currently beneficially
owns approximately 42.4% of the equity interests in the Partnership (excluding the Series A Preferred Units and the Series B
Preferred Units) and 100% of our General Partner, which owns a 0.1% General Partner interest in the Partnership and 100% of our
incentive distribution rights. Our Sponsor does not own any Series A Preferred Units or Series B Preferred Units.
Recent Events
Series A Preferred Units Cash Distribution
On May 12, 2021, we paid a cash distribution
of $0.5625 per unit on our Series A Preferred Units for the period from February 12, 2021 to May 11, 2021, to all Series A Preferred unitholders
of record as of May 5, 2021.
On August 12, 2021, we paid a cash distribution
of $0.5625 per unit on our Series A Preferred Units for the period from May 12, 2021 to August 11, 2021, to all Series A Preferred unitholders
of record as of August 5, 2021.
Series B Preferred Units Cash Distribution
On May 24, 2021, we paid a cash distribution
of $0.546875 per unit on our Series B Preferred Units for the period from February 22, 2021 to May 21, 2021, to all Series B Preferred
unitholders of record as of May 17, 2021.
On August 23, 2021, we paid a cash distribution
of $0.546875 per unit on our Series B Preferred Units for the period from May 22, 2021 to August 21, 2021, to all Series B Preferred unitholders
of record as of August 16, 2021.
Issuance of common stock
On
July 2, 2020, we entered into an ATM Sales Agreement (the “Original Agreement”) for the offer and sale of common units
representing limited partnership interests, having an aggregate offering price of up to $30.0 million. We issued and sold under this
ATM sales program 122,580 common units resulting in net proceeds of $0.3 million. On August 19, 2020, we terminated the Original
Agreement and entered into an amended and restated ATM Sales Agreement (the “A&R Sales Agreement”), for the
offer and sale of common units representing limited partnership interests, having an aggregate offering price of up to $30.0
million. As of the date of this report, we have issued and sold 1,189,667 common units resulting in net proceeds of $3.3 million
under the A&R Sales Agreement.
Our Fleet and our Charters
As of September 16, 2021, our Fleet consisted of
six LNG carriers with an average age of approximately 11.1 years. All six vessels in our Fleet are currently employed or are
contracted to be employed on multi-year time charters with international energy companies, including Gazprom, Equinor and Yamal. As
of September 16, 2021, the estimated contracted revenue backlog of our Fleet was approximately $1.08 billion with average remaining
contract duration of approximately 7.4 years. The estimated contracted revenue backlog of our Fleet excludes options to extend and
assumes full utilization for the full term of the charter. The actual amount of revenues earned and the actual periods during which
revenues are earned may differ from the amounts and periods described above due to, for example, off-hire for maintenance projects,
downtime, scheduled or unscheduled dry-docking, cancellation or early termination of vessel employment agreements, variable hire
rate adjustments and other factors that may result in lower revenues than our average contract backlog per day.
The following table sets forth summary information
about our Fleet and the existing time charters relating to the vessels in our Fleet as of September 16, 2021:
Vessel Name
|
Year
Built
|
Cargo Capacity
(cbm)
|
Ice
Class
|
Propulsion
|
Charterer
|
Earliest Charter
Expiration
|
Latest Charter
Expiration
|
Latest Charter
Expiration including options to extend
|
Clean Energy
|
2007
|
149,700
|
No
|
Steam
|
Gazprom
|
March 2026
|
April 2026
|
n/a
|
Ob River
|
2007
|
149,700
|
Yes
|
Steam
|
Gazprom
|
March 2028
|
May 2028
|
n/a
|
Amur River
|
2008
|
149,700
|
Yes
|
Steam
|
Gazprom
|
June 2028
|
July 2028
|
n/a
|
Arctic Aurora
|
2013
|
155,000
|
Yes
|
TFDE*
|
Equinor
|
September 2023
|
October 2023
|
October 2023
|
Yenisei River
|
2013
|
155,000
|
Yes
|
TFDE*
|
Yamal
|
Q4 2033
|
Q2 2034
|
Q2 2049
|
Lena River
|
2013
|
155,000
|
Yes
|
TFDE*
|
Yamal
|
Q2 2034
|
Q3 2034
|
Q4 2049
|
* As used in this report, “TFDE” refers
to tri-fuel diesel electric propulsion system.
The following table summarizes our estimated contracted charter
revenues and contracted days for the vessels in our Fleet after September 16, 2021 and for the each of the years ending December 31,
2021, 2022 and 2023:
|
After September 16,
|
|
For the years ending December 31,
|
|
Estimated contract backlog, at end of year
|
2021
|
|
2022
|
|
2023
|
|
Contracted time charter revenues (in millions of U.S. Dollars) (1)(2)
|
39.9
|
|
132.4
|
|
131.1
|
|
Contracted days
|
636
|
|
2,100
|
|
2,083
|
|
Available Days
|
636
|
|
2,100
|
|
2,190
|
|
Contracted/Available Days
|
100
|
%
|
100
|
%
|
95
|
%
|
|
(1)
|
Annual revenue calculations are based on: (a) the earliest redelivery dates possible under our charters,
(b) no exercise of any option to extend the terms of those charters except for those that have already been exercised, if any, and (c)
excluding planned periodical class survey repair days.
|
|
(2)
|
Estimated contracted revenues for each of the years 2021, 2022 and 2023 include the amount of $3.5 million,
$12.1 million and $12.1 million respectively, which relate to the estimated portion of the variable hire contained in the above mentioned
time charter contracts with Yamal, which represent the operating expenses of the respective vessels and are subject to annual 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 annual variations in the respective
vessels’ operating costs.
|
We may not be able to perform under these contracts
due to events within or beyond our control, and our counterparties may seek to cancel or renegotiate our contracts for various reasons.
In addition, as of June 30, 2021, we derived our revenues from three charterers, who accounted for 45%, 39% and 16%, respectively. Our
inability or the inability of any of our counterparties to perform the respective contractual obligations may affect our ability to realize
the estimated contractual backlog discussed above and may have a material adverse effect on our financial position, results of operations
and cash flows and our ability to realize the contracted revenues under these agreements. Our estimated contract backlog may be adversely
affected if the Yamal LNG Project, in which certain of our vessels are contracted to be employed, is abandoned or underutilized for any
reason, including, but not limited, to changes in the demand for LNG. Readers are cautioned not to place undue reliance on this information.
Neither our independent auditors nor any other independent accountants have compiled, examined or performed any procedures with respect
to the information presented in the table, nor have they expressed any opinion or any other form of assurance on such information or its
achievability, and assume no responsibility for, and disclaim any association with, the information in the table.
Operating results
Selected financial information
The following tables present selected unaudited
consolidated financial and other data of the Partnership, at the dates and for the periods presented. All amounts are expressed in United
States Dollars, except for Fleet data, unit and per unit data and Other Financial Data.
Selected Historical Financial Data and Other Operating Information
|
Six Months Ended June 30,
|
|
2021
|
|
2020
|
STATEMENT OF INCOME
(In thousands of U.S. Dollars, except for units and per unit data)
|
|
|
|
|
|
|
|
Voyage revenues
|
$
|
67,377
|
|
|
$
|
68,384
|
|
Voyage expenses- including related party (1)
|
|
(1,370)
|
|
|
|
(1,610)
|
|
Vessel operating expenses
|
|
(14,493)
|
|
|
|
(14,470)
|
|
General and administrative expenses- including related party (2)
|
|
(1,723)
|
|
|
|
(1,265)
|
|
Management fees-related party
|
|
(2,987)
|
|
|
|
(3,358)
|
|
Depreciation
|
|
(15,725)
|
|
|
|
(15,812)
|
|
Operating income
|
$
|
31,079
|
|
|
$
|
31,869
|
|
Interest and finance costs, net
|
|
(10,831)
|
|
|
|
(15,100)
|
|
Gain/ (Loss) on derivative instruments
|
|
4,763
|
|
|
|
(3,352)
|
|
Other, net
|
|
(31)
|
|
|
|
(23)
|
|
Net Income
|
$
|
24,980
|
|
|
$
|
13,394
|
|
Common unitholders’ interest in Net Income
|
$
|
19,180
|
|
|
$
|
7,605
|
|
Series A Preferred unitholders’ interest in Net Income
|
$
|
3,375
|
|
|
$
|
3,375
|
|
Series B Preferred unitholders’ interest in Net Income
|
$
|
2,406
|
|
|
$
|
2,406
|
|
General Partner’s interest in Net Income
|
$
|
19
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSS) PER UNIT (basic and diluted):
|
|
|
|
|
|
|
|
Common Unit
|
$
|
0.53
|
|
|
$
|
0.21
|
|
Weighted average number of units outstanding (basic and diluted):
|
|
|
|
|
|
|
|
Common units
|
|
36,201,051
|
|
|
|
35,490,000
|
|
|
|
June
30, 2021
|
|
|
|
December 31, 2020
|
|
BALANCE SHEET DATA, at end of period/ year:
|
|
|
|
|
|
|
|
Total current assets
|
$
|
43,431
|
|
|
$
|
27,120
|
|
Vessels, net
|
|
869,175
|
|
|
|
884,900
|
|
Total assets
|
$
|
969,632
|
|
|
$
|
965,837
|
|
Total current liabilities
|
|
68,421
|
|
|
|
62,845
|
|
Total long-term debt, gross of deferred financing fees, including current portion
|
|
591,000
|
|
|
|
615,000
|
|
Total partners’ equity
|
$
|
358,986
|
|
|
$
|
336,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Historical Financial Data and Other Financial Information
|
Six Months Ended
June 30,
|
|
|
2021
|
|
|
2020
|
|
|
CASH FLOW DATA
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
38,768
|
|
|
$
|
26,836
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
|
—
|
|
|
Net cash used in financing activities
|
$
|
(26,966)
|
|
|
$
|
(29,781)
|
|
|
|
|
|
|
|
|
|
|
|
FLEET PERFORMANCE DATA:
|
|
|
|
|
|
|
|
|
Number of vessels at the end of period
|
|
6
|
|
|
|
6
|
|
|
Average number of vessels in operation in period (3)
|
|
6
|
|
|
|
6
|
|
|
Average age of vessels in operation at end of period/ (years)
|
|
10.9
|
|
|
|
9.9
|
|
|
Available Days (4)
|
|
1,086
|
|
|
|
1,092.0
|
|
|
Fleet utilization (5)
|
|
100%
|
|
|
|
99.5%
|
|
|
|
|
|
|
|
|
|
|
|
OTHER FINANCIAL DATA
|
|
|
|
|
|
|
|
|
Cash distributions per Series A Preferred Unit (6)
|
$
|
1.13
|
|
|
$
|
1.13
|
|
|
Cash distributions per Series B Preferred Unit (7)
|
$
|
1.09
|
|
|
$
|
1.09
|
|
|
Time Charter Equivalent (in U.S. Dollars) (8)
|
$
|
60,780
|
|
|
$
|
61,148
|
|
|
Adjusted EBITDA (8)
|
$
|
47,495
|
|
|
$
|
47,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Voyage expenses include commissions of 1.25% of gross charter hire paid to our Manager and third party
ship brokers.
|
|
(2)
|
Includes the Administrative Services Agreement fees and Executive Service Agreement fees charged by our
Manager and excludes the daily management fees and commercial management fees.
|
|
(3)
|
Represents the number of vessels that constituted our Fleet for the relevant period, as measured by the
sum of the number of days each vessel was a part of our Fleet during the period divided by the number of calendar days in the period.
|
|
(4)
|
Available Days are the total number of calendar days our vessels were in our possession during a period
less the total number of scheduled off-hire days during the period associated with major repairs or dry-dockings.
|
|
(5)
|
We calculate fleet utilization by dividing the number of our revenue earning days, which are the total
number of Available Days of our vessels net of unscheduled off-hire days during a period, by the number of our Available Days during that
period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding employment for its vessels and
minimizing the amount of days that its vessels are off-hire for reasons other than scheduled off-hires for vessel upgrades, dry-dockings
or special or intermediate surveys.
|
|
(6)
|
Corresponds to a cash distribution of $0.5625 per Series A Preferred Unit in respect of the first and
second quarter of 2021 and 2020, respectively, which were paid in the second and third quarter of 2021 and 2020, respectively.
|
|
(7)
|
Corresponds to a cash distribution of $0.546875 in respect of the first and second quarter of 2021 and
2020, respectively, which were paid in the second and third quarter of 2021 and 2020, respectively.
|
|
(8)
|
Non-GAAP Financial Information TCE.
|
Time charter
equivalent rates, or TCE rates, is a measure of the average daily revenue performance of a vessel. For time charters, the TCE rate is
calculated by dividing total voyage revenues, less any voyage expenses, by the number of Available Days during that period. Under a time
charter, the charterer pays substantially all the vessel voyage related expenses. However, we may incur voyage related expenses when positioning
or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during
dry-docking or due to other unforeseen circumstances. The TCE rate is not a measure of financial performance under U.S. GAAP (non-GAAP
measure), and should not be considered as an alternative to voyage revenues, the most directly comparable GAAP measure, or any other measure
of financial performance presented in accordance with U.S. GAAP. However, TCE rate is standard shipping industry performance measure used
primarily to compare period-to-period changes in a company's performance and assists our management in making decisions regarding the
deployment and use of our vessels and in evaluating their financial performance. Our calculation of TCE rates may not be comparable to
that reported by other companies. The following table reflects the calculation of our TCE rates for the periods presented (amounts in
thousands of U.S. dollars, except for TCE rates, which are expressed in U.S. dollars and Available Days):
|
Six Months Ended
June 30,
|
(In thousands of U.S. Dollars, except as otherwise stated)
|
|
2021
|
|
|
|
2020
|
Voyage revenues
|
$
|
67,377
|
|
|
$
|
68,384
|
Voyage expenses
|
|
(1,370)
|
|
|
|
(1,610)
|
Time charter equivalent revenues
|
|
66,007
|
|
|
|
66,774
|
Available Days
|
|
1,086
|
|
|
|
1,092.0
|
Time charter equivalent (TCE) rate (in U.S Dollars)
|
$
|
60,780
|
|
|
$
|
61,148
|
ADJUSTED EBITDA. We define Adjusted
EBITDA as earnings before interest and finance costs, net of interest income, unrealised gains/losses on derivative financial instruments
(if any), taxes (when incurred), depreciation and amortization, class survey costs and significant non-recurring items. Adjusted EBITDA
is used as a supplemental financial measure by and external users of financial statements, such as investors, to assess our operating
performance. We believe that Adjusted EBITDA assists our management and investors by providing useful information that increases the comparability
of our performance operating from period to period and against the operating performance of other companies in our industry that provide
Adjusted EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or
companies of interest, other financial items, depreciation and amortization and taxes, which items are affected by various and possibly
changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods.
We believe that including Adjusted EBITDA as a measure of operating performance benefits investors in (a) selecting between investing
in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength. Adjusted EBITDA is not a measure
of financial performance under U.S. GAAP, does not represent and should not be considered as an alternative to net income, operating income,
cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted EBITDA
excludes some, but not all, items that affect net income and these measures may vary among other companies. Therefore, Adjusted EBITDA,
as presented below, may not be comparable to similarly titled measures of other companies. The following table reconciles Adjusted EBITDA
to net income, the most directly comparable U.S. GAAP financial measure, for the periods presented:
Reconciliation of Net Income to Adjusted EBITDA
|
Six months ended June 30,
|
(In thousands of U.S. Dollars)
|
|
2021
|
|
|
|
2020
|
|
Net Income
|
$
|
24,980
|
|
|
$
|
13,394
|
|
Net interest and finance costs (1)
|
|
10,831
|
|
|
|
15,100
|
|
Depreciation
|
|
15,725
|
|
|
|
15,812
|
|
(Gain)/ Loss on derivative financial instrument
|
|
(4,763)
|
|
|
|
3,352
|
|
Amortization of deferred revenue
|
|
330
|
|
|
|
104
|
|
Amortization of deferred charges
|
|
392
|
|
|
|
108
|
|
Adjusted EBITDA
|
$
|
47,495
|
|
|
$
|
47,870
|
|
|
(1)
|
Includes interest and finance costs (inclusive of amortization of deferred financing costs), net of interest
income, if any.
|
Principal Factors Affecting Our Results of Operations
The principal factors which have affected our
results and are expected to affect our future results of operations and financial position, include:
|
·
|
Ownership days. The number of vessels in our Fleet is a key factor in determining the level of
our revenues. Aggregate expenses also increase as the size of our Fleet increases;
|
|
·
|
Charter rates. Our revenue is dependent on the charter rates we are able to obtain on our
vessels. Charter rates on our vessels are based primarily on demand for and supply of LNG carrier capacity at the time we enter into
the charters for our vessels, which is influenced by LNG market trends, such as the demand and supply for natural gas and in
particular LNG as well as the supply of LNG carriers available for profitable employment. The charter rates we obtain are also
dependent on whether we employ our vessels under multi-year charters or charters with initial terms of less than two years. As of
the date of this report, all six vessels in our Fleet are employed under multi-year time charters with staggered maturities, which
is intended to make us less susceptible to cyclical fluctuations in charter rates than vessels operated on charters of less than two
years. However we expect to be exposed to fluctuations in prevailing charter rates when we seek to re-charter our vessels upon the
expiry of their respective current charters and when we seek to charter vessels that we may acquire in the future. The earliest
contracted re-delivery date for one vessel of our Fleet (the Arctic Aurora) is in the third quarter of 2023.
|
|
·
|
Utilization of our Fleet. Historically, our Fleet has had a limited number of unscheduled off-hire
days. However, an increase in annual off-hire days would reduce our utilization. The efficiency with which suitable employment is secured,
the ability to minimize off-hire days and the amount of time spent positioning vessels also affects our results of operations. If the
utilization of our Fleet is reduced, our financial results would be affected;
|
|
·
|
Daily operating expenses. The level of our vessel operating expenses, including crewing costs,
insurance and maintenance costs. Our ability to control our vessel operating expenses also affects our financial results. These expenses
include commission expenses, crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares
and consumable stores, lubricating oil costs, tonnage taxes and other miscellaneous expenses. In addition, factors beyond our control,
such as developments relating to market premiums for insurance and the value of the U.S. dollar compared to currencies in which certain
of our expenses, primarily crew wages, are paid, can cause our vessel operating expenses to increase;
|
|
·
|
The number of off-hire days and dry-docking requirements, including our ability to complete
scheduled dry-dockings on time and within budget;
|
|
·
|
The timely delivery of any vessels we may acquire in the future;
|
|
·
|
Our ability to maintain solid working relationships with our existing charterers and our ability to increase
the number of our charterers through the development of new working relationships;
|
|
·
|
The performance of our charterers’ obligations under their charter agreements;
|
|
·
|
The effective and efficient technical management of the vessels under our management agreements;
|
|
·
|
Our ability to obtain acceptable equity and debt financing to fund our capital commitments;
|
|
·
|
The supply and demand relationship for LNG shipping services;
|
|
·
|
Our ability to obtain and maintain regulatory approvals and to satisfy technical, health, safety,
environmental and compliance standards that meet our charterer’s requirements;
|
|
·
|
Our ability to successfully defend against any claims, suits, and complaints, including but not limited
to those involving government laws and regulations and product liability;
|
|
·
|
Economic, regulatory, political and governmental conditions that affect shipping and the LNG industry,
which include changes in the number of new LNG importing countries and regions, as well as structural LNG market changes impacting LNG
supply that may allow greater flexibility and competition of other energy sources with global LNG use;
|
|
·
|
Our ability to successfully employ our vessels at economically attractive rates, as our charters expire
or are otherwise terminated;
|
|
·
|
Our access to capital required to acquire additional ships and/or to implement our business strategy;
|
|
·
|
Our level of debt, the related interest expense, our debt amortization levels and the timing of required
principal installments;
|
|
·
|
The level of our general and administrative expenses, including salaries and costs of consultants;
|
|
·
|
Our charterer’s right for early termination of the charters under certain circumstances;
|
|
·
|
Performance of our counterparties, which are limited in number, including our charterers ability to make
charter payments to us;
|
|
·
|
The level of any distribution on all classes of our units; and
|
|
·
|
Other factors detailed in our Annual Report on Form 20-F for the year ended
December 31, 2020, which was filed with the Commission on April 29, 2021, and from time to time in our periodic reports.
|
Results of Operations
Six months ended June 30, 2021 compared to the six months ended
June 30, 2020
Voyage revenues
Voyage revenues, adjusted for deferred revenue amortization,
decreased by $1.1 million, or 1.6%, to $67.7 million in the six months ended June 30, 2021, as compared to $68.5 million in the same period
in 2020. This decrease in voyage revenues (as adjusted) is primarily attributable to the lower variable hire revenues earned on the Lena
River in the six months ended June 30, 2021 compared to the corresponding period in 2020.
Voyage expenses- including voyage expenses to
related party
Voyage expenses (including the commercial management
fee equal to 1.25% of the gross charter hire we pay our Manager as compensation for the commercial services it provides to us) decreased
by $0.2 million, or 12.5%, to $1.4 million in the six month periods ended June 30, 2021, from $1.6 million in the corresponding period
in 2020. This decrease in voyage expenses is primarily attributable to lower bunker consumption and port expenses incurred in the six
month period to June 30, 2021 compared to the corresponding period in 2020 for the vessel Lena River.
Vessel operating expenses
Vessel operating expenses for both the six
months ended June 30, 2021 and the six months ended June 30, 2020 were $14.5 million, which corresponds to daily operating expenses of
$13,345 per LNG carrier in the six-month period ended June 30, 2021, as compared to daily operating expenses of $13,251 per LNG carrier
in the six-month period ended June 30, 2020.
General and Administrative Expenses- including related party
costs
During the six month periods ended June 30,
2021 and 2020, we incurred general and administrative expenses of $1.7 million and $1.3 million, respectively. The $0.4 million, or 30.8%,
increase in the six-month period ended June 30, 2021 general and administrative charges, as compared to the same period in 2020, is mainly
associated with legal and other miscellaneous costs incurred during the period as part of our recurring business. General and administrative
expenses are comprised of legal, consultancy, audit, executive services, administrative services and Board of Directors remuneration fees
as well as other miscellaneous expenditures essential to conduct our business.
Management fees- related party
During each of the six-month periods
ended June 30, 2021 and 2020, we incurred $3.0 million and $3.4 million in management fees respectively, or a daily fee of $2,750
and $3,075 per vessel per day, respectively. The 11.8% decrease in the management fees in the six-month period ended June 30, 2021,
as compared to the same period in 2020, is consistent with the decrease of the daily management fee, following our entry into the
new master management agreement with Dynagas Ltd., which was effective as of January 1, 2021.
Depreciation
Depreciation expense amounted to $15.7 million
and $15.8 million during the six-month periods ended June 30, 2021 and 2020 respectively.
Interest and finance costs
For the six months ended June 30, 2021 and 2020,
interest and finance costs were $10.8 million and $15.3 million, respectively. The decrease of $4.5 million, or 29.4%, in period
interest and finance costs is due to the (i) lower weighted average interest, which was 3.1% in the six months ended June 30, 2021
as compared to 4.2% in the corresponding period and (ii) the reduction in interest bearing debt as compared to the corresponding
period in 2020.
Gain /(Loss) on derivative instruments
On May 7, 2020 we entered into a floating to
fixed interest rate swap transaction effective from June 29, 2020. It provides a fixed 3-month LIBOR rate of 0.41% based on notional
values that reflect the amortization schedule of 100% of our debt outstanding under the $675 Million Credit Facility, until the $675
Million Credit Facility matures in September 2024. The interest rate swap did not qualify for hedge accounting and during the six
months ended June 30, 2021 and 2020, we recognized an unrealised gain on the derivative financial instrument of
$4.8 million and an unrealized loss on derivative financial instrument of $3.4 million respectively.
Significant Accounting Policies and Critical Accounting Policies
There have been no material changes to our
significant accounting policies since December 31, 2020. For a description of our critical accounting policies and all of our significant
accounting policies, see Note 2 to our audited consolidated financial statements included in our Annual Report on Form 20-F for the year
ended December 31, 2020, which was filed with the Commission on April 29, 2021.
Recent Accounting Pronouncements
For information related to recent accounting
pronouncements in 2021, please see Note 2 to our unaudited interim condensed consolidated financial statements included elsewhere in this
report.
Liquidity and Capital Resources
We operate in a capital-intensive industry and
we expect to finance the purchase of additional vessels and other capital expenditures through a combination of borrowings from debt
transactions, cash generated from operations, equity financing and other financing transactions. Our liquidity requirements relate to servicing
the principal and interest on our debt, paying distributions, when, as and if declared by our Board of Directors, funding capital
expenditures and working capital and maintaining cash reserves for the purpose of satisfying the liquidity covenants contained in
the $675 Million Credit Facility. Our funding and treasury activities are intended to maximize investment returns while maintaining
appropriate liquidity.
For the six months ended June 30, 2021, our principal
sources of funds were our operating cash. Under the terms of the $675 Million Credit Facility, the Partnership is restricted from paying
distributions to its common unitholders while borrowings are outstanding under the $675 Million Credit Facility. Scheduled distributions
to the preferred unitholders under the existing Series A Preferred Units and Series B Preferred Units are not restricted provided there
is no event of default while the $675 Million Credit Facility remains outstanding. We frequently monitor our capital needs by projecting
our fixed income, expenses and debt obligations and seek to maintain adequate cash reserves to compensate for any budget overruns.
Our short-term liquidity requirements relate to servicing
the principal and interest on our debt and funding of the necessary working capital, including vessel operating expenses and payments
under our vessel management agreements with our Manager.
Our long-term liquidity requirements relate primarily
to funding capital expenditures, including the potential acquisition of additional vessels, the repayment of our long-term debt.
During the six-month period ended June 30, 2021,
we generated net cash from operating activities of $38.8 million, as compared to $26.8 million in the same period in 2020, which
represents an increase of $12.0 million, or 44.8%. This increase in net cash from operating activities was mainly attributable to
(i) the favorable movement of the working capital accounts in the six-month period ended June 30, 2021, which is described below,
relative to the corresponding period in 2020 and (ii) the decrease in finance costs for the reasons discussed above.
As of June 30, 2021, we reported cash of $86.8 million
(including $50.0 million of restricted cash), which represented an increase of $11.8 million, or 15.8%, from $75 million as of December
31, 2020. As of June 30, 2021, we had available liquidity of $116.8 million, which includes our reported free cash and the $30.0 million
borrowing capacity under our $30 Million Revolving Credit Facility, as amended, with our Sponsor, which was extended on November 14, 2018
for a further five-year term, and is available to us at any time until November 14, 2023. The $30 Million Revolving Credit Facility with
our Sponsor remains available in its entirety as of the date of this report.
Our aggregate outstanding indebtedness as of
June 30, 2021, was $591.0 million, which is gross of unamortized loan fees, under the $675 Million Credit Facility. As of the same date,
we had available borrowing capacity of $30.0 million under our $30 Million Revolving Credit Facility with our Sponsor, as amended, discussed
above. As of June 30, 2021, we were in compliance with all of the covenants, including the financial and liquidity covenants, contained
in the $675 Million Credit Facility.
As of June 30, 2021, we reported a working capital
deficit of $25.0 million as compared to a working capital deficit of $35.7 million as of December 31, 2020, which represents a decrease
of $10.7 million, or 30%. Working capital is equal to current assets minus current liabilities, including the current portion of long-term
debt.
COVID-19 update
The spread of the novel coronavirus (hereinafter referred
to as COVID-19), which was declared a pandemic by the World Health Organization on March 11, 2020, has had and continues to have a significant
negative impact on the global economy and has caused significant volatility in the financial markets, the severity and duration of which
remains uncertain. The COVID-19 virus outbreak has negatively impacted, and may continue to impact adversely, demand for energy including
LNG.
Securing employment for our
Fleet upon the expiration of our charters may be challenging if this environment persists..
COVID-19 has introduced uncertainty in a number of
areas of our business, including operational, commercial, administrative and financial activities. We are focused on maintaining our efficient
operations and, above all, the health and safety of our seafarers and shore-based employees. Because of port restrictions and various
quarantine measures, we continue to experience challenges with crew changes on our vessels. In light of these challenges our crew have
had to and may in the future have to stay on board for longer periods and increased costs may occur in conjunction with crew changes on
our vessels. The uncertainty in global capital and bank credit markets has also affected access and cost of new financing.
We are unable to reasonably predict the estimated
length or severity of the COVID-19 pandemic on our future operating results.
Estimated Maintenance and Replacement Capital Expenditures
Our Partnership Agreement requires our Board of Directors
to deduct from operating surplus each quarter estimated maintenance and replacement capital expenditures, as opposed to actual maintenance
and replacement capital expenditures in order to reduce disparities in operating surplus caused by fluctuating maintenance and replacement
capital expenditures, such as dry-docking and vessel replacement. Because of the substantial capital expenditures we are required to make
to maintain our Fleet, currently, our annual estimated maintenance and replacement capital expenditures for purposes of estimating maintenance
and replacement capital expenditures will be $16.9 million per year, which is composed of $4.2 million for dry-docking and $12.7 million,
including financing costs, for replacing our vessels at the end of their useful lives. The $12.7 million for future vessel replacement
is based on assumptions and estimates regarding the remaining useful lives of our vessels, a long term net investment rate equivalent
to our current expected long-term borrowing costs, vessel replacement values based on current market conditions and residual value of
the vessels at the end of their useful lives based on current steel prices. The actual cost of replacing the vessels in our Fleet will
depend on a number of factors, including prevailing market conditions, hire rates and the availability and cost of financing at the time
of replacement. Our Board of Directors, with the approval of the Conflicts Committee, may determine that one or more of our assumptions
should be revised, which could cause our Board of Directors to increase or decrease the amount of estimated maintenance and replacement
capital expenditures. We may elect to finance some or all of our maintenance and replacement capital expenditures through the issuance
of additional common units which could be dilutive to existing unitholders.
Our Borrowing Activities
As
of June 30, 2021, our outstanding borrowings relate to the $675 Million Credit Facility. For
further information relating to our secured debt, please see Note 3 and Note 5 to our annual consolidated financial statements included
in our Annual Report for the year ended December 31, 2020, which was filed with the Commission on April 29, 2021, and Notes 3 and 5 to
our unaudited interim condensed consolidated financial statements included elsewhere in this report.
Distributions
Distributions on Series A Preferred Units
On February 12, 2021, we paid a cash distribution
for the period from November 12, 2020 to February 11, 2021, of $0.5625 per unit to all Series A Preferred unitholders of record as of
February 5, 2021.
On May 12, 2021, we paid a cash distribution
for the period from February 12, 2021 to May 11, 2021, of $0.5625 per unit to all Series A Preferred unitholders of record as of May 5,
2021.
On August 12, 2021, we paid a cash distribution
for the period from May 12, 2021 to August 11, 2021, of $0.5625 per unit to all Series A Preferred unitholders of record as of August
5, 2021.
Distributions on Series B Preferred Units
On February 22, 2021, we paid a cash distribution
for the period from November 22, 2020 to February 21, 2021, of $0.546875 per unit to all Series B Preferred unitholders of record as of
February 15, 2021.
On May 24, 2021, we paid a cash distribution
for the period from February 22, 2021 to May 21, 2021, of $0.546875 per unit to all Series B Preferred unitholders of record as of May
17, 2021.
On August 23, 2021, we paid a cash distribution
for the period from May 22, 2021 to August 21, 2021, of $0.546875 per unit to all Series B Preferred unitholders of record as of August
16, 2021.
Cash Flows
The following table summarizes our net cash
flows from/(used in) operating, investing and financing activities and our cash and cash equivalents for the six month periods ended June
30, 2021 and 2020:
|
|
Six months ended June 30,
|
|
(in thousands of U.S. Dollars)
|
|
2021
|
|
|
2020
|
|
Net cash provided by operating activities
|
|
$
|
38,768
|
|
|
$
|
26,836
|
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
—
|
|
Net cash used in financing activities
|
|
|
(26,966)
|
|
|
|
(29,781)
|
|
Cash and cash equivalents and restricted cash at beginning of period
|
|
|
74,979
|
|
|
|
66,206
|
|
Cash and cash equivalents and restricted cash at end of period
|
|
$
|
86,781
|
|
|
$
|
63,261
|
|
Operating Activities
Net cash from operating activities
amounted to $38.8 million for the six months ended June 30, 2021, as compared to $26.8 million for the same period in 2020. This
increase in net cash from operating activities was mainly attributable to (i) the favorable movement of the working capital accounts
in the six-month period ended June 30, 2021, which is described above, relative to the corresponding period in 2020 and
(ii) the decrease in finance costs for the reasons discussed above.
Net cash from operating activities amounted
to $26.8 million for the six months ended June 30, 2020, as compared to $16.1 million for the same period in 2019. The increase in net
cash from operating activities was directly correlated with the increase in period net income.
Investing activities
No cash was used in investing activities during both
the six month periods ended June 30, 2021 and 2020.
Financing activities
Net cash used in financing activities was $27.0 million
during the six months ended June 30, 2021 and consisted of: (i) payment of $24.0 million of regular principal payment under the $675.0
Million Credit Facility, (ii) distributions of $5.8 million paid to our preferred unitholders during the period (see “Distributions”
above), (iii) $3.4 million in proceeds from issuance of common units net of payments for securities registration and other filing costs
and (iv) payment of $0.6 million for derivative instruments.
Net cash used in financing activities was $29.8 million
during the six months ended June 30, 2020 and consisted of: (i) payment of $24.0 million of regular principal payment under the $675.0
Million Credit Facility and (ii) distributions of $5.8 million paid to our preferred unitholders during the period.
Contractual Obligations
The following table sets forth our contractual
obligations and their maturity dates as of June 30, 2021:
Obligations
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than 5 years
|
(in thousands of U.S. Dollars)
|
|
|
Long-Term Debt
|
|
$
|
591,000
|
|
|
$
|
48,000
|
|
|
$
|
96,000
|
|
|
$
|
447,000
|
|
|
$
|
—
|
Interest on long term debt (1)
|
|
|
52,343
|
|
|
|
17,927
|
|
|
|
31,387
|
|
|
|
3,029
|
|
|
|
—
|
Interest rate swap payments (2)
|
|
|
(2,721)
|
|
|
|
1,332
|
|
|
|
(3,202)
|
|
|
|
(851)
|
|
|
|
—
|
Management fees & commissions payable to the Manager (3)(4)
|
|
|
78,119
|
|
|
|
7,679
|
|
|
|
15,723
|
|
|
|
16,092
|
|
|
|
38,625
|
Executive Services fee (5)
|
|
|
1,518
|
|
|
|
638
|
|
|
|
880
|
|
|
|
—
|
|
|
|
—
|
Administrative Services fee (6)
|
|
|
40
|
|
|
|
40
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Total
|
|
$
|
720,299
|
|
|
$
|
75,616
|
|
|
$
|
140,788
|
|
|
$
|
465,270
|
|
|
$
|
38,625
|
|
(1)
|
Our variable rate long-term debt outstanding as of June 30, 2021 bears variable interest at a margin over
LIBOR. The calculation of interest payments has been made assuming interest rates based on the one-month period actual LIBOR for the period
ending September 27, 2021 and our applicable margin rate.
|
|
(2)
|
The variable leg of the derivative instrument has been calculated on the basis of the three-month period
forward LIBOR rates as of June 30, 2021.
|
|
(3)
|
Under the terms of the Master Agreement
signed in March 2021 and effective as from January 1, 2021, we currently pay our Manager
a management fee of $2,750 per day per vessel, which is subject to an annual increase of
3%. We may agree with our Manager, subject to the approval of our Conflicts Committee, to
further annual increases, to compensate our Manager for material unforeseen costs incurred
by it when providing the management services. The management agreements that form a part
of the Master Agreement also provide for commissions of 1.25% of charter-hire revenues. In
the event the Master Agreement is terminated for any reason other than default by the Manager,
the applicable management fee under the Master Agreement shall continue to be payable for
a further period of six months as from the effective date of such termination. The Manager
may also terminate the Master Agreement in the event that we undergo a change of control,
in which case, subject to and pursuant to the terms of the Master Agreement, we would be
required to pay to the Manager an amount equal to the net present value, calculated at a discount
rate of 5% per annum of the total aggregate management fees payable from the date of such
termination to June 30th in the tenth year following the date of termination, based
on the number of Vessels managed at the date of termination (as contemplated under the Master Agreement).
|
|
(4)
|
Not including $1.9 million of the “Management fees & commissions payable to the Manager”
related to the commissions on variable hire contained in certain time charter contracts with Yamal, which represents the operating expenses
of the vessel and is subject to annual adjustments on the basis of the actual operating costs incurred within each year. The actual amount
of “Management fees & commissions payable to the Manager” payable to the Manager in respect of such variable hire rate
may therefore differ from the amounts included in the contractual obligations, due to the annual variations in each vessel’s respective
operating cost.
|
|
(5)
|
On March 21, 2014, we entered into an executive services agreement with
our Manager, or the Executive Services Agreement, with retroactive effect to the date of the closing of our IPO, pursuant to which our
Manager provides us with the services of our executive officers, who report directly to our Board of Directors. Under the Executive Services
Agreement, our Manager is entitled to an executive services fee of €538,000 per annum, for the initial five year term, payable in
equal monthly installments. The Executive Services Agreement had an initial term of five years and, on November 18, 2018, has been automatically
renewed for successive five year terms, unless terminated earlier. The calculation of the contractual services fee set forth in the table
above assumes an exchange rate of €1.0000 to $1.1851, the EURO/USD exchange rate as of June 30, 2021 and does not include any incentive
compensation which our Board of Directors may agree to pay.
|
|
(6)
|
On December 30, 2014 and with effect from the IPO closing date, we entered into an administrative services
agreement with our Manager (the “Administrative Services Agreement”), according to which we are provided with certain financial,
accounting, reporting, secretarial and information technology services, for a monthly fee of $10,000, plus expenses, payable in quarterly
installments. The agreement can be terminated upon 120 days’ notice granted either by the Partnership’s Board of Directors
or by the Manager as per the provisions of the agreement.
|
DYNAGAS LNG PARTNERS LP
INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 2021 (UNAUDITED) AND DECEMBER 31,
2020
DYNAGAS LNG PARTNERS LP
INDEX TO UNAUDITED INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DYNAGAS
LNG PARTNERS LP
Consolidated Condensed Balance Sheets
As of June 30, 2021 (unaudited) and December 31,
2020
(Expressed in thousands of U.S.
Dollars — except for unit data)
|
Note
|
|
June
30, 2021
|
|
|
December 31, 2020
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
36,781
|
|
$
|
24,979
|
Trade accounts receivable
|
|
|
46
|
|
|
384
|
Prepayments and other assets
|
4,9
|
|
5,766
|
|
|
949
|
Inventories
|
|
|
838
|
|
|
808
|
Total current assets
|
|
|
43,431
|
|
|
27,120
|
|
|
|
|
|
|
|
FIXED ASSETS, NET:
|
|
|
|
|
|
|
Vessels, net
|
5
|
|
869,175
|
|
|
884,900
|
Total fixed assets, net
|
|
|
869,175
|
|
|
884,900
|
|
|
|
|
|
|
|
OTHER NON-CURRENT ASSETS:
|
|
|
|
|
|
|
Restricted cash
|
|
|
50,000
|
|
|
50,000
|
Due from related party
|
3
|
|
1,350
|
|
|
1,350
|
Accrued charter revenue
|
|
|
54
|
|
|
371
|
Deferred charges
|
|
|
1,614
|
|
|
2,096
|
Derivative financial instrument, non-current portion
|
8,13
|
|
4,008
|
|
|
—
|
Total assets
|
|
$
|
969,632
|
|
$
|
965,837
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ EQUITY
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
Current portion of long-term debt, net of unamortized deferred financing fees of $2,170 and $2,285, respectively
|
6
|
$
|
45,830
|
|
$
|
45,715
|
Trade payables
|
|
|
5,087
|
|
|
4,373
|
Due to related party
|
3
|
|
618
|
|
|
1,706
|
Accrued liabilities
|
7,9
|
|
6,194
|
|
|
1,655
|
Derivative financial instrument, current portion
|
8,13
|
|
1,332
|
|
|
1,332
|
Unearned revenue
|
|
|
9,360
|
|
|
8,064
|
Total current liabilities
|
|
|
68,421
|
|
|
62,845
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
|
Deferred revenue
|
|
|
3,212
|
|
|
3,199
|
Long-term debt, net of current portion and unamortized deferred financing fees of $3,987 and $5,034, respectively
|
6
|
|
539,013
|
|
|
561,966
|
Derivative financial instrument, non- current portion
|
8,13
|
|
—
|
|
|
1,334
|
Total non-current liabilities
|
|
|
542,225
|
|
|
566,499
|
|
|
|
|
|
|
|
Commitments and contingencies
|
9
|
|
—
|
|
|
—
|
PARTNERS’ EQUITY:
|
|
|
|
|
|
|
Common unitholders (unlimited authorized; 36,802,247 units and 35,612,580 units issued and outstanding as at June 30, 2021 and December 31, 2020)
|
10
|
|
232,258
|
|
|
209,784
|
Series A Preferred unitholders (3,450,000 authorized; 3,000,000 Series A Preferred Units issued and outstanding as at June 30, 2021 and December 31, 2020)
|
10
|
|
73,216
|
|
|
73,216
|
Series B Preferred unitholders: (2,530,000 authorized; 2,200,000 Series B Preferred Units issued and outstanding as at June 30, 2021 and December 31, 2020)
|
10
|
|
53,498
|
|
|
53,498
|
General Partner (35,526 units issued and outstanding as at June 30, 2021 and December 31, 2020)
|
10
|
|
14
|
|
|
(5)
|
Total partners’ equity
|
|
|
358,986
|
|
|
336,493
|
Total liabilities and partners’ equity
|
|
$
|
969,632
|
|
$
|
965,837
|
The accompanying notes are an integral part of these consolidated financial
statements.
DYNAGAS LNG PARTNERS LP
Unaudited Interim Condensed Consolidated Statements
of Income
For the six month periods ended June 30, 2021 and
2020
(Expressed in thousands of U.S. Dollars—except
for unit and per unit data)
|
|
|
|
Six months ended
June 30,
|
|
Note
|
|
2021
|
|
|
|
2020
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
Voyage revenues
|
|
$
|
67,377
|
|
|
$
|
68,384
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
Voyage expenses (including related party)
|
|
|
(1,370)
|
|
|
|
(1,610)
|
|
Vessel operating expenses
|
|
|
(14,493)
|
|
|
|
(14,470)
|
|
General and administrative expenses (including related party)
|
3
|
|
(1,723)
|
|
|
|
(1,265)
|
|
Management fees-related party
|
3
|
|
(2,987)
|
|
|
|
(3,358)
|
|
Depreciation
|
5
|
|
(15,725)
|
|
|
|
(15,812)
|
|
Operating income
|
|
$
|
31,079
|
|
|
$
|
31,869
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSES):
|
|
|
|
|
|
|
|
|
Interest and finance costs
|
6, 12
|
|
(10,831)
|
|
|
|
(15,309)
|
|
Interest income
|
|
|
—
|
|
|
|
209
|
|
Gain/ (Loss) on derivative financial instruments
|
13
|
|
4,763
|
|
|
|
(3,352)
|
|
Other, net
|
|
|
(31)
|
|
|
|
(23)
|
|
Total other income/ (expenses)
|
|
|
(6,099)
|
|
|
|
(18,475)
|
|
|
|
|
|
|
|
|
|
|
Partnership’s Net Income
|
|
$
|
24,980
|
|
|
$
|
13,394
|
|
Common unitholders’ interest in Net Income
|
|
$
|
19,180
|
|
|
$
|
7,605
|
|
Series
A Preferred unitholders’ interest in Net Income
|
|
$
|
3,375
|
|
|
$
|
3,375
|
|
Series
B Preferred unitholders’ interest in Net Income
|
|
$
|
2,406
|
|
|
$
|
2,406
|
|
General Partner’s interest in Net Income
|
|
$
|
19
|
|
|
$
|
8
|
|
Earnings per unit, basic and diluted:
|
11
|
|
|
|
|
|
|
|
Common unit (basic and diluted)
|
|
$
|
0.53
|
|
|
$
|
0.21
|
|
Weighted average number of units outstanding, basic and diluted:
|
11
|
|
|
|
|
|
|
|
Common units
|
|
|
36,201,051
|
|
|
|
35,490,000
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
DYNAGAS LNG PARTNERS LP
Unaudited Interim Consolidated Statements
of Partners’ Equity
For the six month periods ended June 30, 2021 and
2020
(Expressed in thousands of U.S. Dollars—except
for unit data)
|
|
Series A Preferred
|
|
Series B Preferred
|
|
Common
|
|
|
|
General Partner
|
|
|
Series A Preferred
|
|
Series B Preferred
|
|
|
Common
|
|
|
|
General Partner
|
|
Total
|
BALANCE,
December 31, 2019
|
|
3,000,000
|
|
2,200,000
|
|
35,490,000
|
|
|
|
35,526
|
|
$
|
73,216
|
$
|
53,498
|
|
$
|
187,021
|
|
|
$
|
(28)
|
$
|
313,707
|
-Net income
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
3,375
|
|
2,406
|
|
|
7,605
|
|
|
|
8
|
|
13,394
|
-Distributions declared and paid (common and preferred units) (Note 10)
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
(3,375)
|
|
(2,406)
|
|
|
—
|
|
|
|
—
|
|
(5,781)
|
BALANCE,
June 30, 2020
|
|
3,000,000
|
|
2,200,000
|
|
35,490,000
|
|
|
|
35,526
|
|
$
|
73,216
|
$
|
53,498
|
|
$
|
194,626
|
|
|
$
|
(20)
|
$
|
321,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred
|
|
Series B Preferred
|
|
Common
|
|
|
|
General Partner
|
|
|
Series A Preferred
|
|
Series B Preferred
|
|
|
Common
|
|
|
|
General Partner
|
|
Total
|
BALANCE,
December 31, 2020
|
|
3,000,000
|
|
2,200,000
|
|
35,612,580
|
|
|
|
35,526
|
|
$
|
73,216
|
$
|
53,498
|
|
$
|
209,784
|
|
|
$
|
(5)
|
$
|
336,493
|
-Net income
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
3,375
|
|
2,406
|
|
|
19,180
|
|
|
|
19
|
|
24,980
|
- Issuance of common stock, net of issuance costs (Note 10)
|
|
—
|
|
—
|
|
1,189,667
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
3,294
|
|
|
|
—
|
|
3,294
|
-Distributions declared and paid (common and preferred units) (Note 10)
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
|
(3,375)
|
|
(2,406)
|
|
|
—
|
|
|
|
—
|
|
(5,781)
|
BALANCE,
June 30, 2021
|
|
3,000,000
|
|
2,200,000
|
|
36,802,247
|
|
|
|
35,526
|
|
$
|
73,216
|
$
|
53,498
|
|
$
|
232,258
|
|
|
$
|
14
|
$
|
358,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
DYNAGAS LNG PARTNERS LP
Unaudited Interim Consolidated Statements of Cash
Flows
For the six month periods ended June 30, 2021 and
2020
(Expressed in thousands of U.S. Dollars)
|
Note
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
Cash flows from Operating Activities:
|
|
|
|
|
|
|
|
Net income:
|
|
$
|
24,980
|
|
$
|
13,394
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation
|
5
|
|
15,725
|
|
|
15,812
|
|
Amortization and write-off of deferred financing fees
|
12
|
|
1,162
|
|
|
1,287
|
|
Deferred revenue amortization
|
|
|
330
|
|
|
104
|
|
Amortization and write off of deferred charges
|
|
|
392
|
|
|
108
|
|
(Gain)/ Loss on derivative financial instruments
|
13
|
|
(4,763)
|
|
|
3,352
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
338
|
|
|
(577)
|
|
Prepayments and other assets
|
|
|
(317)
|
|
|
(481)
|
|
Inventories
|
|
|
(30)
|
|
|
(67)
|
|
Due from/to related parties
|
|
|
(1,088)
|
|
|
(3,730)
|
|
Deferred expenses
|
|
|
(9)
|
|
|
(934)
|
|
Trade accounts payable
|
|
|
712
|
|
|
(181)
|
|
Accrued liabilities
|
|
|
40
|
|
|
(311)
|
|
Unearned revenue
|
|
|
1,296
|
|
|
(940)
|
|
Net cash provided by Operating Activities
|
|
$
|
38,768
|
|
$
|
26,836
|
|
|
|
|
|
|
|
|
|
Cash flows from Investing Activities:
|
|
|
|
|
|
|
|
Other additions to vessels’ equipment
|
|
|
—
|
|
|
—
|
|
Net cash used in Investing Activities
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Cash flows from Financing Activities:
|
|
|
|
|
|
|
|
Net proceeds from issuance of common units
|
10
|
|
3,407
|
|
|
—
|
|
Payment of securities registration and other filing costs
|
10
|
|
(13)
|
|
|
—
|
|
Distributions declared and paid
|
10
|
|
(5,781)
|
|
|
(5,781)
|
|
Repayment of long-term debt
|
6
|
|
(24,000)
|
|
|
(24,000)
|
|
Payment of derivative instruments
|
13
|
|
(579)
|
|
|
—
|
|
Net cash used in Financing Activities
|
|
$
|
(26,966)
|
|
$
|
(29,781)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents and restricted cash
|
|
|
11,802
|
|
|
(2,945)
|
|
Cash and cash equivalents and restricted cash at beginning of the period
|
|
|
74,979
|
|
|
66,206
|
|
Cash and cash equivalents and restricted cash at end of the period
|
|
$
|
86,781
|
|
$
|
63,261
|
|
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
36,781
|
|
|
13,261
|
|
Restricted cash
|
|
|
50,000
|
|
|
50,000
|
|
Cash and cash equivalents and restricted cash
|
|
$
|
86,781
|
|
$
|
63,261
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
1. Basis of Presentation and General Information:
Basis of Presentation and General Information
Dynagas LNG Partners LP (“Dynagas Partners”
or the “Partnership”) was incorporated as a limited partnership on May 30, 2013, under the laws of the Republic of the Marshall
Islands. On November 18, 2013, the Partnership successfully completed its initial public offering (the “IPO”), pursuant to
which, the Partnership offered and sold 8,250,000 common units to the public at $18.00 per common unit, and in connection with the closing
of the IPO, the Partnership’s Sponsor, Dynagas Holding Ltd., a company beneficially wholly owned by Mr. George Prokopiou, the Partnership’s
Chairman and major unitholder and certain of his close family members, offered and sold 4,250,000 common units to the public at $18.00
per common unit. In connection with the IPO, the Partnership entered into certain agreements including: (i) an omnibus agreement with
the Sponsor, as amended (Note 3(c)), (the “Omnibus Agreement”) and, (ii) a $ million interest free revolving credit facility
with its Sponsor (the “$30 million Sponsor Facility”) (Note 3(b)), which was extended on November 14, 2018 until November, 2023, to be used for general Partnership purposes.
In March 2020, the World Health Organization declared
the outbreak of a novel coronavirus (or COVID-19) as a pandemic. The COVID-19 pandemic and measures to contain its spread have negatively
impacted regional and global economies and trade patterns in markets in which we operate, the way we operate our business, and the businesses
of our charterers and suppliers The Partnership has experienced some logistical challenges across its fleet, however, as of June 30, 2021,
the Partnership did not experience any material negative financial impacts to its results of operations or financial position as a result
of COVID-19.
As of June 30, 2021, the Partnership had a working
capital deficit of $25.0 million as compared to the working capital deficit of $35.7 million as of December 31, 2020, which is mainly
due to the current portion of its long-term debt. The Partnership believes that current sources of funds and those that the Partnership
anticipates to internally generate for a period of at least the next twelve months, will be sufficient to fund the operations of its Fleet,
and to meet the Partnership’s normal working capital requirements, service principal and interest debt, and make at least the required
distribution on Series A Preferred Units and Series B Preferred Units in accordance with the Partnership’s Agreement. Accordingly,
the Partnership continues to adopt the going concern basis in preparing its financial statements.
The Partnership is engaged in the seaborne transportation
industry through the ownership and operation of high specification LNG vessels and is the sole owner (directly or indirectly) of all outstanding
shares or units of the following subsidiaries as of June 30, 2021:
Vessel Owning Subsidiaries:
Basis
of Presentation and General Information - Vessel Owning Subsidiaries (Table)
Company Name
|
Country of incorporation/ formation
|
Vessel Name
|
Delivery date from shipyard
|
Delivery date to Partnership
|
Cbm Capacity
|
Pegasus Shipholding S.A. (“Pegasus”)
|
Marshall Islands
|
Clean Energy
|
March 2007
|
October 2013
|
149,700
|
Lance Shipping S.A. (“Lance”)
|
Marshall Islands
|
Ob River
|
July 2007
|
October 2013
|
149,700
|
Seacrown Maritime Ltd. (“Seacrown”)
|
Marshall Islands
|
Amur River
|
January 2008
|
October 2013
|
149,700
|
Fareastern Shipping Limited (“Fareastern”)
|
Malta
|
Arctic Aurora
|
July 2013
|
June 2014
|
155,000
|
Navajo Marine Limited (“Navajo”)
|
Marshall Islands
|
Yenisei River
|
July 2013
|
September 2014
|
155,000
|
Solana Holding Ltd. (“Solana”)
|
Marshall Islands
|
Lena River
|
October 2013
|
December 2015
|
155,000
|
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
1. Basis of Presentation and General Information
(continued):
Non-Vessel Owning Subsidiaries:
Basis
of Presentation and General Information - Non-Vessel Owning Subsidiaries (Table)
Company Name
|
Country of incorporation/formation
|
Purpose of incorporation
|
Dynagas Equity Holding Limited (“Dynagas Equity”)
|
Marshall Islands
|
Holding company that owns all of the outstanding share capital of Arctic LNG Carriers Ltd. (“Arctic LNG”).
|
Dynagas Operating GP LLC (“Dynagas Operating GP”)
|
Marshall Islands
|
Limited Liability Company in which the Partnership holds a 100% membership interest and which has 100% of the Non-Economic General Partner Interest in Dynagas Operating LP.
|
Dynagas Operating LP (“Dynagas Operating”)
|
Marshall Islands
|
Limited partnership in which the Partnership holds a 100% limited partnership interest and which owns 100% of the issued and outstanding share capital of Dynagas Equity.
|
Dynagas Finance Inc.
|
Marshall Islands
|
Wholly owned subsidiary of the Partnership whose activities were
limited to the co-issuance of the 2019 Notes discussed under Note 6 and engaging in other activities incidental thereto.
|
Arctic LNG
|
Marshall Islands
|
Wholly owned subsidiary of the Partnership which is directly wholly owned by Dynagas Equity and which owns all of the issued and outstanding share capital of Pegasus, Lance, Seacrown, Fareastern, Navajo, Solana and Dynagas Finance LLC.
|
Dynagas Finance LLC
|
Delaware
|
Wholly owned subsidiary of Arctic LNG and co-borrower of the
Partnership’s Term Loan discussed under Note 6.
|
|
|
|
|
|
|
Since the Partnership’s inception, the
technical, administrative and commercial management of the Partnership’s fleet is performed by Dynagas Ltd. (“Dynagas”
or the “Manager”), a related company, wholly owned by the Partnership’s Chairman (Note 3(a)).
As of June 30, 2021, the Partnership’s Sponsor
owned 42.4% of the outstanding equity interests in the Partnership (excluding the Series A Preferred Units and the Series B Preferred
Units, both of which, generally, have no voting rights), including the 0.1% general partner interest retained by it, as the General Partner,
through Dynagas GP LLC, which is owned and controlled by the Sponsor.
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("U.S.
GAAP") and applicable rules and regulations of the U.S Securities and Exchange Commission (“SEC”) for interim financial
reporting. The unaudited interim condensed consolidated financial statements include the accounts of Dynagas Partners and its wholly-owned
subsidiaries, referred to above. All intercompany balances and transactions have been eliminated upon consolidation.
These unaudited interim condensed consolidated financial
statements and accompanying notes should be read in conjunction with the Partnership’s audited consolidated financial statements
for the year ended December 31, 2020 and notes thereto included in its Annual Report on Form 20-F, filed with the SEC on April 29, 2021.
In the opinion of the Partnership’s management, all adjustments, which include only normal recurring adjustments, necessary for
a fair presentation of the financial position, operating results and cash flows have been included in the financial statements for the
periods presented. Interim results are not necessarily indicative of the results that may be expected for the year ending December 31,
2021.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
2. Significant Accounting Policies and Recent Accounting
Pronouncements:
Significant Accounting Policies and
Recent Accounting Pronouncements
A summary of the Partnership’s significant
accounting policies can be found in the Partnership’s consolidated financial statements included in the Annual Report on Form 20-F
for the year ended December 31, 2020, filed with the Securities and Exchange Commission on April 29, 2021. There have been no material
changes to these policies in the six month period ended June 30, 2021.
Significant Accounting Policies and
Recent Accounting Pronouncements - Major Charterers (Table)
During the six month periods ended June 30,
2021 and 2020, charterers that individually accounted for more than 10% of the Partnership’s revenues were as follows:
Charterer
|
|
2021
|
|
2020
|
A
|
|
45
|
%
|
|
45
|
%
|
B
|
|
39
|
%
|
|
40
|
%
|
C
|
|
16
|
%
|
|
15
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions
for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. ASU 2020-04 applies to
contracts that reference LIBOR or another reference rate expected to be terminated because of reference rate reform. In January 2021,
the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848). The amendments in this Update clarify that certain optional expedients
and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivative instruments that use an interest rate
for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update
to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing
guidance to derivative instruments affected by the discounting transition. The amendments in this Update apply to all entities that elect
to apply the optional guidance in Topic 848. ASU 2020-04 and ASU 2021-10 can be adopted as of March 12, 2020 through December 31, 2022.
As of June 30, 2021, the Partnership has not made any contract modifications to replace the reference rate in any of its agreements and
has not evaluated the effects of this standard on its consolidated financial position, results of operations, and cash flows. The Partnership
is in the process of evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings
Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic
718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).
The ASU addresses the diversity in practice in an issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options (e.g., warrants) that remain equity classified after modification or exchange. Under the guidance, an issuer determines
the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt or
for other reasons. The ASU is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. Early adoption is permitted, but entities need to apply the guidance as of the beginning of the fiscal year
that includes the interim period in which they choose to early adopt the guidance. The guidance is applied prospectively to all modifications
or exchanges that occur on or after the date of adoption. The Partnership is currently evaluating the impact this guidance may have on
its consolidated financial statements and related disclosures.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
2. Significant Accounting Policies and Recent Accounting Pronouncements
(continued):
In July 2021, the FASB issued ASU No. 2021-05 Leases
(Topic 842): Lessors-Certain Leases with Variable Lease Payments. The ASU amends the lessor lease classification guidance in ASC 842 for
leases that include any amount of variable lease payments that are not based on an index or rate.
If such a lease meets the criteria in ASC 842-10-25-2
through 25-3 for classification as either a sales-type or direct financing lease, and application of the sales-type or direct financing
lease recognition guidance would result in recognition of a selling loss, then the amendments require the lessor to classify the lease
as an operating lease. For public business entities that have adopted ASC 842 as of July 19, 2021, the amendments in ASU 2021-05 are effective
for fiscal years beginning after Dec 15, 2021 and for interim periods within those fiscal years. The Partnership is currently evaluating
the impact this guidance may have on its consolidated financial statements and related disclosures.
3. Transactions with related parties:
Transactions with related parties
During the six-month periods ended June 30, 2021
and 2020, the Partnership incurred the following charges in connection with related party transactions, which are included in the accompanying
unaudited interim condensed consolidated statements of income:
Transactions with related parties -
Statements of Income (Table)
|
|
2021
|
|
2020
|
Included in voyage expenses – related party
|
|
|
|
|
Charter hire commissions (a)
|
$
|
851
|
$
|
855
|
|
|
|
|
|
Included in general and administrative expenses – related party
|
|
|
|
|
Executive services fee (d)
|
$
|
324
|
$
|
298
|
Administrative services fee (e)
|
$
|
60
|
$
|
60
|
Management fees-related party
|
|
|
|
|
Management fees (a)
|
$
|
2,987
|
$
|
3,358
|
|
|
|
|
|
|
As of June 30, 2021 and December 2020, balances with related parties consisted
of the following:
Transactions with related parties - Balance Sheet (Table)
|
|
2021
|
|
|
2020
|
Assets:
|
|
|
|
|
|
Security deposits to Manager (a)
|
$
|
1,350
|
|
$
|
1,350
|
Total assets due from related party, non-current
|
$
|
1,350
|
|
$
|
1,350
|
|
|
|
|
|
|
Liabilities included in Due to related party:
|
|
|
|
|
|
Working capital due to Manager (a)
|
$
|
356
|
|
$
|
1,032
|
Executive service charges due to Manager (d)
|
$
|
162
|
|
$
|
159
|
Administrative service charges due to Manager (e)
|
$
|
30
|
|
$
|
30
|
Other Partnership expenses due to Manager
|
$
|
70
|
|
$
|
485
|
Total liabilities due to related party, current
|
$
|
618
|
|
$
|
1,706
|
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
3. Transactions with related parties (continued):
a) Dynagas Ltd.
The Partnership’s vessels
originally entered into vessel management agreements with Dynagas Ltd., the Partnership’s Manager (the “Management
Agreements”), which terminated on December 31, 2020. Pursuant to the terms of these Management Agreements, the Manager
provided each vessel-owning entity of the Partnership with management services, including, but not limited to, commercial,
technical, crew, accounting and vessel administrative services in exchange for an initial fixed daily management fee of $2.5
per vessel, for a period beginning upon the vessel’s delivery until the termination of the Management Agreement. Beginning on
the first calendar year after the commencement of each vessel’s Management Agreement and each calendar year thereafter, these
fees were adjusted upwards by 3%
until expiration of each Management Agreement.
On March 3, 2021, the Partnership entered into a
new master management agreement (the “Master”) with Dynagas Ltd. (the “Manager”), which amends and
supersedes the previous commercial, technical, crew, accounting and vessel administrative services agreement and reduces the
technical management fees payable from $3,167
per day per vessel to $2,750
per day per vessel commencing on January 1, 2021. Beginning on the first calendar year after the commencement of Master Agreement
and each calendar year thereafter, these fees are adjusted upwards by 3%, subject to further annual increases to reflect material
unforeseen costs of providing the management services. The amount of such further-increase is to be agreed between the Partnership
and the Manager, which amount will be reviewed and approved by the Partnership’s Conflicts Committee. Under the terms of the
Master Agreement, the Manager charges the Partnership for any additional capital expenditures, financial costs, operating expenses
and general and administrative expenses that are not covered by the management fees.
The Master Agreement initially
terminates on December 31, 2030 and upon expiration, automatically extends in additional five-year increments if notice of
termination is not previously provided by the Partnership's vessel-owning subsidiaries. In the event the Master Agreement is
terminated for any reason other than default by the Manager, the applicable management fee under the Master Agreement shall
continue to be payable for a further period of six
months as from the effective date of such termination. The Manager may also terminate the Master Agreement in the event that
the Partnership undergoes a change of control, in which case, subject to and pursuant to the terms of the Master Agreement, the
Partnership would be required to pay to the Manager an amount equal to the net present value calculated at a discount rate of 5% per
annum of the total aggregate management fees payable from the date of such termination to June 30th in the tenth year
following the date of termination based on the number of Vessels managed at the date of termination (as contemplated under the
Master Agreement).
During the six month periods ended June 30, 2021 and
2020, each vessel was charged a daily management fee of $2.8 and $3.1, respectively. During the six-month periods ended June 30, 2021
and 2020, management fees under the vessel Master and Management Agreements amounted to $2,987, and $3,358 respectively, and are separately
reflected in the accompanying unaudited interim condensed consolidated statements of income.
The Master also provides
for:
|
(i)
|
a commission of 1.25% over charter-hire agreements;
and
|
During the six month periods ended June
30, 2021 and 2020, charter hire commissions under the Master and the Management Agreements amounted to $851 and $855, respectively, and
are included in Voyage expenses-related party in the accompanying unaudited interim condensed consolidated statements of income.
The Management Agreements also provide for an advance
equal to three months daily management fee. The Master Agreement also provides that during its’
term, the advance shall continue to be maintained by the Manager. Such advances as of June 30, 2021 and 2020, amounted to $1,350,
are separately reflected in Non-Current Assets as Due from related party in the consolidated condensed balance sheets.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
3. Transactions with related parties (continued):
In addition, the Manager makes payments for operating
expenses with funds provided by the Partnership. As of June 30, 2021 and December 31, 2020 amounts of $356 and $1,032, respectively, were
due to the Manager in relation to these operating expenses.
(b) Loan from related party
On November 18, 2013, upon the completion of
its IPO, the Partnership entered into the $ million Sponsor Facility with an original term of from the closing date, to be
used for general Partnership purposes, including working capital.
The $30 million Sponsor Facility was
extended on November 14, 2018, for an additional term of on terms and conditions identical to the initial credit facility (the “$30 million Extended Sponsor
Facility”). The $30 million Extended Sponsor Facility may be drawn and be prepaid in whole or in part at any time during the
life of the facility which is until November,
2023.
amounts have been drawn under the respective facility as of June 30, 2021 and December 31, 2020.
November 30, 2023
(c) Optional Vessel acquisitions from Sponsor/ Omnibus Agreement
At the IPO date, the Partnership and its Sponsor
entered into the Omnibus Agreement, as amended and as currently in effect. The amended Omnibus Agreement sets out (i) the terms and the
extent the Partnership and the Sponsor may compete with each other, (ii) the procedures to be followed for the exercise of the Partnership’s
option to acquire the Initial Optional Vessels (as defined in the Omnibus Agreement), as well as the Partnership’s option to acquire
the Sponsor’s ownership interest (which is currently % as of June 30, 2021) in each of five joint venture entities, each of
which owns a 172,000 cubic meter ARC 7 LNG carrier which were all delivered between December 2017 and February 2019, (iii) certain rights
of first offer to the Sponsor for the acquisition of LNG carriers from the Partnership, and (iv) the Sponsor’s provisions of certain
indemnities in favor of the Partnership.
The purchase option periods with regards
to the Initial Optional Vessels that were not exercised, expired in December 2018.
The Partnership’s option periods with
regards to the Sponsor’s interests in in all five joint venture entities described above also expired unexercised.
(d) Executive Services Agreement
On March 21, 2014, the Partnership entered into
an executive services agreement (the “Executive Services Agreement”) with its Manager with retroactive effect from the
IPO closing date, pursuant to which the Manager provides the Partnership the certain services of its executive officers, who report
directly to the Board of Directors. Under the Executive Services Agreement, the Manager is entitled to an executive services fee of
€538
per annum (or $648
on the basis of an average Euro/US Dollar exchange rate of €1.0000/$1.2052
in the six-month period ended June 30, 2021), payable in equal monthly installments. The
Executive Services Agreement had an initial term of five years and, on November 18, 2018, was automatically renewed for successive
five year terms, unless terminated earlier. During the six month periods ended June 30, 2021 and 2020, executive service fees
amounted to $324
and $298,
respectively, and are included in general and administrative expenses in the accompanying unaudited interim condensed consolidated
statements of income.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
3. Transactions with related parties (continued):
(e) Administrative Services Agreement
On December 30, 2014 and with effect from the IPO
closing date, the Partnership entered into an administrative services agreement (the “Administrative Services Agreement”)
with its Manager, according to which the Partnership is provided with certain financial, accounting, reporting, secretarial and information
technology services, for a monthly fee of $10, plus expenses, payable in quarterly installments. The Administrative Services Agreement
can be terminated upon 120 days’ notice granted either by the Partnership’s Board of Directors or by Dynagas. During the six
month periods ended June 30, 2021 and 2020, administrative service fees amounted to $60 and are included in general and administrative
expenses – related party in the accompanying unaudited interim condensed consolidated statements of income.
4. Prepayments and other assets:
Prepayments and other assets
The amounts in the consolidated condensed balance sheets are analyzed as
follows:
Prepayments and other assets (Table)
|
|
Period/Year ended
|
|
|
June 30, 2021
|
|
December 31, 2020
|
Insurance claims receivable (Note 9)
|
$
|
4,500
|
$
|
—
|
Prepayments and other assets
|
$
|
1,266
|
$
|
949
|
Total prepayments and other assets
|
$
|
5,766
|
$
|
949
|
5. Vessels, net:
Vessels, net
The amounts in the consolidated condensed balance sheets are analyzed as
follows:
Vessels, net (Table)
|
|
Vessel
Cost
|
|
|
Accumulated
Depreciation
|
|
Net Book
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
|
$
|
1,167,909
|
|
|
$
|
(283,009)
|
|
|
$
|
884,900
|
Depreciation
|
|
|
—
|
|
|
|
(15,725)
|
|
|
|
(15,725)
|
Balance June 30, 2021
|
|
$
|
1,167,909
|
|
|
$
|
(298,734)
|
|
|
$
|
869,175
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021, all vessels comprising the Partnership’s
fleet were first priority mortgaged as collateral to secure the $675 Million Credit Facility, further discussed in Note 6.
6. Long-Term Debt:
Long-Term Debt
The amounts shown in the consolidated condensed
balance sheets are analyzed as follows:
Long-Term Debt - Credit Facilities
And Senior Notes (Table)
|
|
|
|
Period/ Year Ended
|
|
Debt
instruments
|
|
Borrowers-Issuers
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
$675 Million Credit Facility
|
|
Fareastern Shipping Limited, Pegasus Shipholding S.A., Lance Shipping S.A., Seacrown Maritime Ltd., Navajo Marine Limited, Solana Holding Ltd.
|
|
|
591,000
|
|
|
|
615,000
|
|
Total debt
|
|
|
|
$
|
591,000
|
|
|
$
|
615,000
|
|
Less deferred financing fees
|
|
|
|
|
(6,157)
|
|
|
|
(7,319)
|
|
Total debt, net of deferred finance costs
|
|
|
|
$
|
584,843
|
|
|
$
|
607,681
|
|
Less current portion, net of deferred financing fees
|
|
|
|
$
|
(45,830)
|
|
|
$
|
(45,715)
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion and deferred financing fees
|
|
|
|
$
|
539,013
|
|
|
$
|
561,966
|
|
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
6. Long-Term Debt (continued):
$675 Million Senior Secured Term Loan Facility
($675 Million Credit Facility)
On September 18, 2019, Fareastern Shipping Limited,
Pegasus Shipholding S.A., Lance Shipping S.A., Seacrown Maritime Ltd., Navajo Marine Limited and Solana Holding Ltd., wholly owned by
the Partnership, as co-borrowers, entered into a syndicated $675.0 million senior secured term loan, the $675 Million Credit Facility,
with leading international banks. On September 25, 2019, the amount of $675.0 million was drawn under the $675 Million Credit Facility
and the Partnership repaid in full the indebtedness outstanding under the $480 Million Senior Secured Term Loan Facility of $470.4 million;
and on October 30, 2019, the remaining amount of $204.6 million plus cash on hand was used to repay the $250 Million Senior Unsecured
Notes due 2019.
The $675 Million Credit Facility bears interest at
U.S. LIBOR (in case LIBOR is less than zero, LIBOR shall be deemed to be zero) plus 3.00% margin and is secured by, among other things,
first priority mortgages on the six LNG vessels in the Partnership's fleet. The $675 Million Credit Facility is repayable over five years
in 20 consecutive quarterly payments plus a balloon payment in the fifth year.
The $675 Million Credit Facility contains financial
covenants that require the Partnership to:
|
·
|
meet a specified minimum ratio
of Cash and Cash Equivalents to Total Liabilities;
|
|
·
|
meet a specified maximum ratio
of Total Liabilities to the Market Value Adjusted Total Assets; and
|
|
·
|
maintain a minimum liquidity
of $50.0 million in a restricted Cash Collateral Account.
|
The $675 Million Credit Facility restricts the Partnership
from declaring or making any distributions to its common unit-holders while borrowings are outstanding. Scheduled distributions to the
preferred unit-holders under the existing Series A Preferred Units and Series B Preferred Units are not restricted provided there is no
event of default while the $675 Million Credit Facility remains outstanding.
As of June 30, 2021, the Partnership was in compliance
with all financial covenants prescribed in its $675 Million Credit Facility.
The annual principal payments for the Partnership’s
outstanding $675 Million Credit Facility as at June 30, 2021, required to be made after the balance sheet date were as follows:
Long - Term Debt - Principal Payments (Table)
Year
ending June 30,
|
|
|
Amount
|
|
2022
|
|
$
|
48,000
|
|
2023
|
|
|
48,000
|
|
2024
|
|
|
48,000
|
|
Thereafter
|
|
|
447,000
|
|
Total long-term debt
|
|
$
|
591,000
|
|
|
|
|
|
|
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
6. Long-Term Debt (continued):
The weighted average interest rate on the Partnership’s
long-term debt for the six month periods ended June 30, 2021 and 2020 was 3.1% and 4.2%, respectively.
Total interest incurred on long-term debt for
the six month periods ended June 30, 2021 and 2020, amounted to $9,531 and $13,939 respectively, and is included in Interest and finance
costs (Note 12) in the accompanying unaudited interim condensed consolidated statements of income.
7. Accrued liabilities:
Accrued liabilities
The amounts in the consolidated condensed balance sheets are analyzed as
follows:
Accrued liabilities (Table)
|
|
Period/Year ended
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
Provisions for legal claims (Note 9)
|
$
|
4,500
|
|
$
|
—
|
Other accrued liabilities
|
$
|
1,694
|
|
$
|
1,655
|
Total accrued liabilities
|
$
|
6,194
|
|
$
|
1,655
|
8. Fair Value Measurements:
Fair Value Measurements
The following methods and assumptions
were used to estimate the fair value of each class of financial instruments:
-
Cash and cash equivalents, trade accounts receivable,
amounts due from/to related parties and trade accounts payable: The carrying values reported in the accompanying consolidated condensed
balance sheets for those financial instruments (except for the fair value of non-current portion of amounts due from related party) are
considered Level 1 items as they represent liquid assets and liabilities with short-term maturities and are reasonable estimates
of their fair values. The carrying value of these instruments is separately reflected in the accompanying consolidated condensed balance
sheets. The fair value of the non-current portion of the amounts due from related parties, determined through Level 3 inputs of the
fair value hierarchy by discounting future cash flows using the Partnership’s estimated cost of capital, is $969 as of June
30, 2021, compared to its carrying value of $1,350 as of the same date.
-
Long-term debt: The $675 Million Credit Facility
discussed in Note 6, has an approximate recorded value due to the variable interest rate payable and is thus considered a Level 2 item
in accordance with the fair value hierarchy as LIBOR rates are observable at commonly quoted intervals for the full terms of the loans.
-
Derivative financial instrument: The carrying
values reported in the consolidated condensed balance sheets for the swap transaction are determined through Level 2 of the fair value
hierarchy and are derived principally from interest rates, yield curves and other items that allow value to be determined.
A fair value hierarchy that prioritizes
the inputs used to measure fair value has been established by Generally Accepted Accounting Principles. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority
to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the
use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
-
Level 1: Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
-
Level 2: Observable inputs other than quoted
prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable
market data; and
-
Level 3: Unobservable inputs that are supported
by little or no market activity and that are significant to the determination of the fair value of the assets or liabilities.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
8. Fair Value Measurements (continued):
The following table summarizes the hierarchy for determining
and disclosing the fair value of assets and liabilities by valuation technique on a recurring basis as of the valuation date.
Fair Value Measurements - Recurring Measurements (Table)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Recurring measurements:
|
|
|
June 30,
2021
|
|
December 31, 2020
|
|
|
Assets
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
4,008
|
|
—
|
|
|
Total
|
|
$
|
4,008
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
1,332
|
|
2,666
|
|
|
Total
|
|
$
|
1,332
|
$
|
2,666
|
|
|
9. Commitments and Contingencies:
Commitments and Contingencies
(a) Long-term leases:
The Partnership employs its vessels under time charter
contracts. Certain of its time charters provide for variable lease payments, escalating lease payments, charterers’ options to extend
the lease terms, termination clauses and charterers’ options to purchase the underlying assets. The Partnership, in order to calculate
future minimum contracted lease payments, has assessed all the relevant factors that create an economic incentive for the lessee to be
reasonably certain to exercise lease renewal, termination or purchase options.
Two of the Partnership’s time charters contain
escalating lease payments and two of its time charters contain both fixed lease and variable lease payments. The variable lease payments
relate to services and executory costs (the “Opex Lease Element”). The Opex Lease Element is determined on a cost pass
through basis on the vessel’s actual operating expenses for each applicable year. Under time charters, the vessels are employed
for a specific period of time in accordance with the terms of each agreement. Normally, the charterer has the option to redeliver the
vessel to the owner in a period that varies a few days more or less from the contractual termination date. For certain of its time charters,
the Partnership has provided to its charterers, the option to extend the lease term for additional periods under the same or different
terms. The options are exercised close to the original termination dates.
Specifically, under two of the
Partnership’s time charters, the charterer has the option to extend the original lease term by three consecutive periods of
five years, the first declared at the original termination date and each of the two remaining at or close to the termination of each
option period. Certain time charters are subject to the satisfaction of important conditions, which, if not satisfied, or
waived by the charterer, may result in their cancellation or amendment and in such case the Partnership may not receive the
contracted revenues thereunder.
The Partnership assessed the respective termination
clauses and concluded that the lease term is not affected. In addition, under certain time charters and, upon certain circumstances triggering
a sanctions event, as defined therein, the charterers have the option to purchase the vessels unless the Partnership can remediate such
event.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
9. Commitments and Contingencies (continued):
The Partnership’s future
minimum contracted lease payments (excluding variable lease payments) under its non-cancelable long-term time charter contracts, as of
June 30, 2021, gross of brokerage commissions, without taking into consideration any assumed off-hire days (including those arising out
of periodical class survey requirements), is as analyzed below:
Commitments and Contingencies - Charter
Hire (Table)
Period/
Year ending December 31,
|
|
Amount
|
2021
(period)
|
|
63,196
|
2022
|
|
125,359
|
2023
|
|
119,046
|
2024
|
|
103,935
|
2025
|
|
103,478
|
2026 and thereafter
|
|
447,063
|
Total
|
$
|
962,077
|
(b) Legal Proceedings:
Various claims, suits, and complaints, including those
involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may
arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Partnership’s
vessels.
Currently, management is not aware of any such claims
not covered by insurance or contingent liabilities which should be disclosed (other than that referred below) or for which a provision
should be established in the accompanying consolidated condensed financial statements. The Partnership accrues for the cost of environmental
liabilities when management becomes aware that a liability is probable and is then able to reasonably estimate the probable exposure.
Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should
be established in the accompanying consolidated condensed financial statements. The Partnership is covered in the event of any liabilities
associated with the individual vessels’ actions up to the maximum limits as provided for by the Protection and Indemnity (P&I)
Clubs, members of the International Group of P&I Clubs.
On May 16, 2019, a purported stockholder of
the Partnership filed a putative class action lawsuit against the Partnership and certain related entities and individual officers and
directors of the Partnership in the United States District Court for the Southern District of New York (Case No.19- cv-04512). The complaint
purports to be brought on behalf of shareholders who purchased the common stock of the Partnership between February 16, 2018 and March
21, 2019. The Complaint generally alleges that the defendants violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements regarding, among other matters, new charter
agreements that the Partnership entered into with various energy companies and the Partnership’s expectations about its ability
to sustain its quarterly distribution.
The complaint seeks unspecified damages,
attorneys’ fees, and other costs. On August 19, 2019, the Court appointed a group of shareholders as Lead Plaintiffs in the
action, who filed an amended complaint on September 26, 2019. The amended complaint makes allegations similar to those in the
original complaint, extends the class period (December 21, 2017 through March 21, 2019), adds as defendants three additional
directors of the Partnership and the underwriters of the Partnership’s Series B Preferred Units Offering, and asserts new
claims under Section 20A of the Securities Exchange Act of 1934 on behalf of plaintiffs who acquired Partnership securities or sold
put options contemporaneously with the Series B Preferred Units Offering, and under Sections 11, 12(a)(2) and 15 of the Securities
Act of 1933 based on allegedly false and/or misleading statements in the offering documents for the Series B Preferred Units
Offering. The Partnership, related entity defendants, and underwriter defendants filed a motion to dismiss the amended complaint on
December 5, 2019.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
9. Commitments and Contingencies (continued):
In May 2021, the parties entered into a
Stipulation and Agreement of Settlement of $4.5 million, for the full and final settlement of the litigation, which is subject to
Court approval. In June 2021, the Court granted preliminary approval of the settlement and scheduled a hearing for November 5, 2021
to consider final approval of the settlement. As of June 30, 2021, the Partnership determined that itself, its’ related entity
defendants, and individual defendants would be liable for the amount prescribed by the abovementioned settlement agreement and
recorded an accrual of $4.5 million, representing the Partnership’s best estimate of that amount at that date. The settlement
will be covered in full by the Partnership´s directors’ and officers’ insurance and as such, the Partnership
has recorded the amount of $4.5 million as a claim receivable by the directors’ and officers’ insurance, which is
included in “Prepayments and other assets” in the accompanying consolidated condensed balance sheets. The Partnership,
related entity defendants, and individual defendants continue to believe that the claims asserted against them in the litigation are
without merit, have not conceded or admitted any wrongdoing or liability, and are not conceding any wrongdoing or liability in
agreeing to settle the litigation.
(c) Technical and Commercial Management Agreement:
As further disclosed in Note 3, the Partnership has
contracted with Dynagas Ltd. for the provision of commercial, administrative and technical management of its vessels pursuant to certain
Management Agreement. On March 3, 2021, the Partnership entered into a new master management agreement (the “Master”) with
Dynagas Ltd. (the “Manager”), which amends and supersedes the previous commercial, technical, crew, accounting and vessel
administrative services management agreement. For the commercial services provided under the Master Management Agreement, the Partnership
pays a commission of 1.25% over the charter-hire revenues arranged by the Manager, which will survive the termination of the agreement
until the termination of each charter party in force at such time. The estimated commission payable to the Manager over the minimum contractual
charter revenues, discussed under (a) above, is $12,026. For vessel administrative and technical management fees, the Partnership paid
during the six-month period ended June 30, 2021, a daily management fee of $2.8 per vessel (Note 3(a)). Management fees for the period
from July 1, 2021 to the date of the expiration of the agreement on December 31, 2030, adjusted for the 3% annual inflation in accordance
with the terms of the Master Agreement, are estimated to amount to $66,093.
10. Partners’ Equity:
Partners’ Equity
Series A Preferred Units:
On July 20, 2015, the Partnership concluded an underwritten
public offering of 3,000,000 9% Series A Preferred Units, representing limited partner interests in the Partnership, at a liquidation
preference of $25.00 per unit. The Partnership received $72.3 million of proceeds from this offering, net of the $2.4 million underwriting
discount of and incurred offering expenses of $0.3 million.
Series B Preferred Units:
On October 23, 2018, the Partnership concluded the
underwritten public offering of 2,200,000 Series B Preferred Units, representing limited partner interests in the Partnership, at a liquidation
preference of $25.00 per unit. The Partnership received net proceeds of $53.0 million from this offering, after deducting underwriters’
discounts and commissions and offering expenses, which amounted to $2.0 million.
Concurrently with the conclusion of the Series B Preferred
Units Public Offering, the Partnership entered into the Limited Partnership Agreement in order to, among others, conform its provisions
to the terms and provisions related to the issuance of the Series B Preferred Units and to remove references to subordinated units and
subordinated period that are no longer in effect.
As of June 30, 2021, the Partnership had 36,802,247
common units, 15,595,000 of which are owned by the Sponsor, 3,000,000 Series A Preferred Units, 2,200,000 Series B Preferred Units and
35,526 general partner units issued and outstanding.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
10. Partners’ Equity (continued):
Common and General Partner unit distribution
provisions:
The Partnership pays distributions in the following
manner:
• first, 100% to the holders of common units and to the
General Partner in accordance with their relative percentage interests, until the distributed amount in respect of each common unit equals
the minimum quarterly distribution; and
• second, 100% to the holders of common units and
to the General Partner in accordance with their relative percentage interests, until each unit has received an aggregate distribution
of a specified dollar amount.
The percentage allocations of available cash from
operating surplus among the common unitholders, the General Partner and the holders of the incentive distribution rights up to the various
target distribution levels are illustrated below. The percentage interests shown for the common unitholders, the General Partner and the
holders of the incentive distribution rights for the minimum quarterly distribution are also applicable to quarterly distribution amounts
that are less than the minimum quarterly distribution. The percentage interests shown for our General Partner include its 0.1% General
Partner interest only and assumes that our General Partner has contributed any capital necessary to maintain its 0.1% General Partner
interest. Under the Limited Partnership Agreement, the holder of the incentive distribution rights in the Partnership, which is currently
the General Partner, has the right to receive an increasing percentage of cash distributions after the first target distribution level.
Partners’ Equity (Table)
|
|
Total Quarterly
Distribution Target
Amount
|
|
Unitholders
|
|
General
Partner
|
|
Holders
of IDRs
|
Minimum Quarterly Distribution
|
|
$0.365
|
|
|
99.9
|
%
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
First Target Distribution
|
|
up to $0.420
|
|
|
99.9
|
%
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
Second Target Distribution
|
|
above $0.420 up to $0.456
|
|
|
85.0
|
%
|
|
|
0.1
|
%
|
|
|
14.9
|
%
|
Third Target Distribution
|
|
Above $0.456 up to $0.548
|
|
|
75.0
|
%
|
|
|
0.1
|
%
|
|
|
24.9
|
%
|
Thereafter
|
|
above $0.548
|
|
|
50.0
|
%
|
|
|
0.1
|
%
|
|
|
49.9
|
%
|
On September 26, 2019 the Partnership announced that
pursuant to the closing of the $675 Million Credit Facility (Note 6), the Partnership is prohibited from paying distribution to its common
unit-holders while borrowings are outstanding under the $675 Million Credit Facility.
Preferred Units distribution and redemption
provisions:
Distributions on the Series A Preferred Units are
cumulative from the date of original issue and are payable quarterly on February 12, May 12, August 12 and November 12, of each year,
when, as and if declared by the Partnership’s Board of Directors out of amounts legally available for such purpose. Distributions
are payable at a distribution rate of 9.00% per annum of the stated liquidation preference.
Any time on or after August 12, 2020, the Series A
Preferred Units may be redeemed, in whole or in part, at the Partnership’s option, out of amounts legally available for such purpose,
at a redemption price of $25.00 per unit plus an amount equal to all accumulated and unpaid distributions thereon to the date of redemption,
whether or not declared. No Series A Preferred Units were redeemed as of June 30, 2021.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
10. Partners’ Equity (continued):
Distributions on the Series B Preferred Units
are cumulative from the date of original issue and are payable quarterly on February 22, May 22, August 22 and November 22, of each year,
when, as and if declared by the Partnership’s Board of Directors out of amounts legally available for such purpose. Furthermore,
distributions on the Series B Preferred Units are payable (i) from and including the original issue date to, but excluding, November 22,
2023 at a fixed rate equal to 8.75% per annum of the stated liquidation preference per unit and (ii) from and including November 22, 2023
at a floating rate equal to three-month LIBOR plus a spread of 5.593% per annum of the stated liquidation preference per unit.
At any time on or after November 22, 2023, the Series
B Preferred Units may be redeemed, in whole or in part, at the Partnership’s option, out of amounts available for such purpose,
at a redemption price of $25.00 per unit plus an amount equal to all accumulated and unpaid distributions thereon to the date of redemption,
whether or not declared.
The Series A Preferred Units and the Series B Preferred
Units represent perpetual equity interests in the Partnership, unlike the Partnership’s indebtedness, do not give rise to a claim
for payment of a principal amount at a particular date. The Series A Preferred Units rank pari passu with the Series B Preferred Units.
Both the Series A Preferred Units and the Senior B Preferred Units rank senior to the Partnership’s common units and to each other
class or series of limited partner interests or other equity established after the original issue date of the Series A Preferred Units
and the Series B Preferred Units that is not expressly made senior to or on a parity with the Series A Preferred Units and the Series
B Preferred Units as to payment of distributions. The Series A Preferred Units and the Series B Preferred Units are rank junior to all
of the Partnership’s existing and future indebtedness. The interests of the holders of Series A Preferred Units or Series B Preferred
Units could be diluted by the issuance of additional preferred units, including additional Series A Preferred units or Series B Preferred
Units, and by other transactions.
Common unit distributions:
No quarterly cash distributions to Common unitholders
were made with respect to the six month period ended June 30, 2021 and 2020.
Series A Preferred unit distributions:
On January 21, 2021, the Partnership’s Board
of Directors declared a cash distribution of $0.5625 per unit on its Series A Preferred Units for the period from November 12, 2020 to
February 11, 2021. The cash distribution was paid on February 12, 2021, to all Series A preferred unitholders of record as of February
5, 2021.
On April 20, 2021, the Partnership’s Board of
Directors declared a cash distribution of $0.5625 per unit on its Series A Preferred Units for the period from February 12, 2021 to May
11, 2021. The cash distribution was paid on May 12, 2021, to all Series A preferred unitholders of record as of May 5, 2021.
Series B Preferred unit distributions:
On January 28, 2021, the Partnership’s Board
of Directors declared a cash distribution of $0.546875 per unit on its Series B Preferred Units for the period from November 22, 2020
to February 21, 2021. The cash distribution was paid on February 22, 2021, to all Series B preferred unitholders of record as of February
15, 2021.
On April
27, 2021, the Partnership’s Board of Directors declared a cash distribution of $0.546875
per unit on its Series B Preferred Units for the period from February 22, 2021 to May 21, 2021. The cash distribution was paid on
May 24, 2021, to all Series B preferred unitholders of record as of May 17, 2021.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
10. Partners’ Equity (continued):
General Partner Distributions:
During the six-month periods ended June 30, 2021 and
2020, no payments were made by the Partnership to its General Partner as a holder of the incentive distribution rights.
At
the market” equity program:
On
July 2, 2020, the Partnership entered into an ATM Sales Agreement (the “Original Agreement”) for the offer and sale of common
units representing limited partnership interests, having an aggregate offering price of up to $30.0 million. On August 19, 2020, the Partnership
terminated the above mentioned ATM Sales Agreement and entered into an amended and restated ATM Sales Agreement (the “A&R Sales
Agreement”), for the offer and sale of common units representing limited partnership interests, having an aggregate offering price
of up to $30.0 million. During the year ended December 31, 2020 the Partnership issued and sold 122,580 common units resulting in net
proceeds of $0.3 million under the Original ATM sales agreement. No common units were sold under the A&R Sales Agreement during the
year ended December 31, 2020.
During
the six month period ended June 30, 2021, the Partnership issued and sold 1,189,667 of common units resulting in net proceeds of $3.3
million under the A&R Sales Agreement.
11. Earnings per Unit:
Earnings per Unit
The Partnership calculates earnings/ (loss) per
unit by allocating distributed and undistributed net income/ (losses) for each period to common and general partner units, after adjusting
for the effect of preferred distributions, only to the extent that they are earned.
Any undistributed earnings for the period
are allocated to the various unitholders based on the distribution waterfall for cash available for distribution specified in the
Limited Partnership Agreement, as generally described in Note 10 above. Where distributions relating to the period are in excess of
earnings, the deficit is also allocated according to the cash distribution model. The sum of the distributed amounts and the
allocation of the undistributed earnings or deficit to each class of unitholders is divided by the weighted average number of units
outstanding during the period. Diluted earnings per unit, if applicable, reflects the potential dilution that could occur if
potentially dilutive instruments were exercised, resulting in the issuance of additional units that would then share in the
Partnership’s net earnings. The Partnership had no dilutive instruments in the six month periods ended June 30, 2021 and
2020.
The calculations of the basic and diluted earnings per common
unit are presented below:
Earnings per Unit (Table)
|
|
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
Partnership’s Net income
|
|
$
|
24,980
|
|
$
|
13,394
|
Less:
|
|
|
|
|
|
|
Net Income attributable to preferred unitholders
|
|
|
5,781
|
|
|
5,781
|
General Partner’s interest in Net Income
|
|
|
19
|
|
|
8
|
Net income attributable to common unitholders
|
|
$
|
19,180
|
|
$
|
7,605
|
Weighted average number of common units outstanding, basic and diluted
|
|
|
36,201,051
|
|
|
35,490,000
|
Earnings per common unit, basic and diluted
|
|
$
|
0.53
|
|
$
|
0.21
|
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
12. Interest and Finance Costs:
Interest and Finance Costs
The amounts in the unaudited interim condensed consolidated statements
of income are analyzed as follows:
Interest and Finance Costs (Table)
|
|
|
|
Six months ended
June 30,
|
|
|
|
2021
|
|
2020
|
|
Interest expense (Note 6)
|
$
|
9,531
|
|
$
|
13,939
|
|
Amortization of deferred financing fees
|
|
1,162
|
|
|
1,287
|
|
Other
|
|
138
|
|
|
83
|
|
Total
|
$
|
10,831
|
|
$
|
15,309
|
|
13. Derivative financial instruments:
Derivative financial instrument
On May 7, 2020, the Partnership entered into a
floating to fixed interest rate swap transaction with a leading international bank, for the purpose of managing its exposure to
LIBOR variability that the Partnership has under the $675 Million Credit Facility. The swap transaction, which is effective from June
29, 2020, provides for a fixed 3-month LIBOR
rate of 0.41%
based on notional values that reflect the amortization schedule of 100% of the Partnership’s debt outstanding under its $675
Million Credit Facility, until the $675 Million Credit Facility matures in September 2024. The swap agreement did not meet hedge accounting criteria and, therefore, changes in its fair value are reflected
in earnings.
September 30, 2024
As of June 30, 2021 and December 31, 2020, the outstanding
notional amount of Partnership’s interest rate swap was $591.0 million and $615.0 million respectively. The fair value of this interest
rate swap outstanding at June 30, 2021 and December 31, 2020 amounted to an asset of $2,676 and a liability of $2,666 respectively (Note
8) and is included in Derivative financial instrument in consolidated condensed balance sheets as presented in the table below.
As of June 30, 2021 and 2020, the Partnership
recognized a gain on derivative financial instruments of $4.8
million and a loss on derivative financial instruments of $3.4
million, respectively, which is included in Gain/ (Loss) on derivative financial instrument in the accompanying unaudited interim
condensed consolidated statements of income as presented in the table below.
The realized loss on non-hedging interest rate swaps included
in “Gain/ (Loss) on derivative financial instruments, net” amounted to $0.6 million and $nil for the six month periods ended
June 30, 2021 and 2020.
0
Tabular Disclosure of Derivatives Location
Derivatives are recorded in the balance sheet on
a net basis by counterparty when a legal right of setoff exists. The following tables present information with respect to the fair
values of the derivative instrument reflected in the balance sheet on a gross basis by transaction. The tables also present
information with respect to gains/ (losses) on derivative positions reflected in the unaudited interim condensed consolidated
Statement of Income.
DYNAGAS LNG PARTNERS LP
Notes to the Unaudited Interim Condensed Consolidated Financial Statements June 30, 2021
(Expressed in thousands of U.S. Dollars—except for unit and per unit data, unless otherwise stated)
|
13. Derivative financial instruments (continued):
Derivative Instruments not designated as hedging
instruments – Balance Sheet Location
Derivative Financial Instrument - Not
designated as Hedging Instrument - Balance Sheet Location (Table)
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Derivative
|
|
Balance Sheet Location
|
|
|
|
|
|
|
June 31,
2021
|
|
|
December 31,
2020
|
|
|
June 31,
2021
|
|
|
December 31,
2020
|
|
Interest rate swap
|
|
Derivative financial Instruments, Current
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
1,332
|
|
|
1,332
|
|
Interest rate swap
|
|
Derivative financial Instruments, non- Current
|
|
|
|
|
|
|
4,008
|
|
|
—
|
|
|
—
|
|
|
1,334
|
|
|
|
Total
|
|
|
|
|
|
|
$ 4,008
|
|
|
$ —
|
|
|
$ 1,332
|
|
|
$ 2,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Instruments not designated as Hedging Instruments –
Net effect on the Consolidated Condensed Statements of Income
Derivative Financial Instrument - Not
Designated as Hedging Instrument - Net Effect on the Consolidated Statements of Comprehensive Income (Table)
|
Net Realized and Unrealized Gain/ (Loss) Recognized on Statement of Income Location
|
|
Six months
ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
Interest rate swap
|
Gain/ (Loss) on derivative instruments
|
|
|
4,763
|
|
|
(3,352)
|
|
|
Total
|
|
$
|
4,763
|
|
$
|
(3,352)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Subsequent
Events:
Subsequent
Events
|
(a)
|
Quarterly Series A Preferred unit cash distribution: On July 21, 2021, the Partnership’s
Board of Directors declared a cash distribution of $0.5625 per unit on its Series A Preferred Units for the period May 12, 2021 to August
11, 2021. The cash distribution was paid on August 12, 2021, to all Series A preferred unitholders of record as of August 5, 2021.
|
|
(b)
|
Quarterly Series B Preferred unit cash distribution: On July 28, 2021, the Partnership’s
Board of Directors declared a cash distribution of $0.546875 per unit on its Series B Preferred Units for the period from May 22, 2021
to August 21, 2021. The cash distribution will be paid on August 23, 2021, to all Series B preferred unitholders of record as of August
16, 2021.
|