Dynagas LNG Partners LP, an owner and operator of LNG carriers, yesterday announced results (unaudited) for the three months ended March 31, 2014.
First Quarter Highlights:
Net income for the three months ended March 31, 2014 of $11.0 million;
Distributable Cash Flow ** of $12.3 million during the first quarter of 2014; and
Adjusted EBITDA ** for the three month period ended March 31, 2014 of $16.3 million.
** Adjusted EBITDA and Distributable Cash Flow are not recognized measurements under U.S. GAAP. Please refer to the definitions and reconciliation of these measurements to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP in Appendix B.
Recent Developments:
Quarterly Cash Distribution: On April 25, 2014, the Partnership declared a cash distribution for the first quarter of 2014 of $0.365 per unit. The cash distribution was paid on May 12, 2014, to all unitholders of record as of May 5, 2014.
New 13-year time charter contract for the Clean Force and amendment of current contract expiration date: On April 17, 2014, the Partnership entered into a new 13-year time-charter contract with Gazprom Marketing & Trading Singapore Pte. Ltd ("Gazprom") for the Clean Force, one of the Partnership's LNG Carriers. In connection with the new Gazprom charter, the Partnership entered into an agreement with BG Group Plc., the current charterer of the Clean Force, to amend, at no cost to the Partnership, the expiration date of the current time-charter contract from the third quarter of 2016 to July 2015, at which time the new Gazprom contract will take effect. The Partnership's new 13-year Gazprom contract for the Clean Force increases the Partnership's average contract duration from approximately three years to approximately seven years.
Acquisition of the LNG carrier Arctic Aurora: On April 17, 2014, the Partnership entered into a Share Purchase Agreement to purchase from Dynagas Holding Ltd. (our "Sponsor") 100% of the ownership interests in the entity that owns and operates the Arctic Aurora, a 2013 built 155,000 cbm ice class LNG carrier, for an aggregate purchase price of $235 million. The Arctic Aurora acquisition is subject to the Partnership obtaining the funds necessary to pay the purchase price and the satisfaction of certain closing conditions. The Partnership expects to finance the acquisition with the net proceeds of a public offering of its common units and a portion of the borrowings under a new $340 million senior secured revolving credit facility. The Arctic Aurora is currently operating under a time charter with Statoil ASA ("Statoil") with an initial term of five years that expires in July 2018. Statoil has the right to extend the charter for consecutive additional one-year periods following the initial charter period.
The Partnership expects this charter to provide it with total contracted revenue of approximately $117.2 million based on an expected delivery date of May 30, 2014, excluding options to extend and assuming full utilization for 4.1 years, which is the remaining term of the charter based on the earliest contract expiration date in July 2018. The Partnership estimates that the Arctic Aurora acquisition will generate annual gross revenues of approximately $28.3 million, assuming full utilization for the full term of the charter, and annual net cash from operations of approximately $21.7 million. Following the completion of this acquisition, the Partnership's management intends to recommend to the Board an increase in the Partnership's quarterly cash distribution per unit of between $0.0225 and $0.0275 (or annualized increase of between $0.09 and $0.11 per unit), which would become effective for the distribution with respect to the quarter ending June 30, 2014 on a pro-rata basis after giving effect to the Arctic Aurora acquisition. In addition, the acquisition of the Arctic Aurora broadens the Partnership's customer base and reduces the weighted average age of the Partnership's fleet from 6.1 years to 5.3 years based on an expected delivery date of May 30, 2014.
Commitment for a new Senior Secured Revolving Credit Facility: On March 26, 2014, the Partnership entered into a binding commitment letter with an affiliate of Credit Suisse Securities (USA) LLC for a new $340 million Senior Secured Revolving Credit Facility which is conditioned on the closing of Arctic Aurora acquisition. The facility will bear interest at LIBOR plus a margin and will be payable in 17 consecutive equal quarterly payments of $5.0 million each and a balloon payment of $255.0 million at maturity and which may be extended under certain conditions. The Partnership intends to utilize a portion of the amount it expects to draw down under this facility to partially finance the Arctic Aurora acquisition and the balance to refinance $214.1 million currently outstanding under the Partnership's existing senior secured revolving facility (the "2013 Senior Secured Revolving Credit Facility").