Dynagas LNG Partners LP

Thank you for standing by, ladies and gentlemen, and welcome to the DynaGas LNG Partners Conference call on the third quarter 2020 financial results. We have with us Mr. Tony Lauritsen, Chief Executive Officer, and Mr. Michael Gregos, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. At this time, I would like to read the Safe Harbour Statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbour Provision of the Private Security Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risk and uncertainties which may affect Dynagas LNG Partners' business prospects and results of operations. Such risks are more fully disclosed in Dynagas LNG Partners' filings with the Securities and Exchange Commission. And now I'll pass the floor to Mr. Lauritsen. Please go ahead, sir.

Morning, everyone, and thank you for joining us in our three and nine months and the 30th September 2020 Earnings Conference Call. I'm joined today by our CFO, Michael Gregos. We have issued a press release announcing our results for the said period. Certain non-GAAP measures will be discussed on this call, and we have provided a description of those measures as well as a discussion of why we believe this information to be useful in our press release. Moving on to slide three of the presentation. We are pleased to report the results for the three months and nine months ended 30 September 2020. All six LNG carriers in our fleet are operating under their respective long-term charters with international gas producers. Despite the ongoing operational challenges the industry is going through with respect to COVID-19, we are pleased to report 100% utilization for the fleet for the third quarter of 2020. The ongoing impact of COVID-19 has so far been operationally manageable due to our manager's COVID-19 response plan, which has been implemented with the support of our seafarers, charters, and employees, for which we are grateful. For the third quarter of 2020, we reported net income of $10 million, earnings per common unit of $0.20, adjusted EBDA of $24.3 million, and adjusted earnings per common unit of $0.21. When compared with the same period in 2019, this improved performance is attributable to an increase in voyage revenues and a decrease in interest and finance costs coupled with stable vessel operating expenses. In August 2020, we entered into an at-the-market offering program pursuant to which the partnership may offer and sell common units having an aggregate offering price of up to 30 million of its common units. We expect that the ATM will be utilized selectively, and to date, the partnership has issued and sold 122,580 common units, resulting in net proceeds of about 0.4 million under this ATM program. We paid in August 2020 a quarterly cash distribution of $0.5625 per Series A preferred unit for the period from May 12 to August 11, 2020, and a quarterly cash distribution of $0.54116 per Series B preferred unit for the period from May 22 to August 21, 2020. Subsequent to the quarter, we paid in November. 2020, a quarterly cash distribution of 56 cents and a quarter per Series A preferred unit for the period from August 12 to November 11, 2020, and declared a quarterly cash distribution of 54 cents and 11 sixteenths per Series B preferred unit for the period from August 22 to November 21, 2020, to be paid on or about November 23, 2020. Going forward, we intend to continue our strategy of using our cash flow generation to delever our balance sheet, reinforce liquidity, and generate cash so as to build equity value over time, which will enhance our ability to pursue future growth initiatives. I will now turn the presentation over to Michael, who will provide you with further comments to the financial results.

Thank you, Tony. Turning to slide four, we are pleased with the third quarter results. Net income for the quarter increased by close to 313 percent to $10 million over the third quarter of 2019. Our adjusted EBITDA increased by 1.7 percent to $24.2 million compared to the third quarter of 2019. The improvement in our financial performance compared with the same period last year is attributable to the reduced financing costs following our transformative debt refinancing in the fourth quarter of 2019. Turning to slide five, since our debt refinancing, our profitability has steadily increased and has now stabilized at increased levels compared to prior quarters with adjusted earnings per common unit of 21 cents for the third quarter Reflecting the stable nature of our contract-based operating model and the limited variability of our operating and finance expenses, our weighted average interest expense was reduced from 6.5 percent in the third quarter of 2019 to 3.27 percent in the third quarter of 2020, reflecting lower libel rates and decreases in our weighted average indebtedness from $734 million in the third quarter of 2019 to $639 million in the third quarter of 2020. Our primary focus right now is the organic deleveraging of the balance sheet. Moving on to slide six, for the quarter we generated $27.6 million in operating cash flow, including working capital changes. Excluding working capital changes, we generated operating cash flow $18.9 million, and cash flow after debt service payments, other financing items, and payments to preferred unit holders amounted to $4 million, in line with our prior guidance. For the quarter, we increased our cash balance by $12.8 million to $76 million. Slide 7, this slide gives you a snapshot of certain financial metrics. As of the end of September, we had $627 million debt outstanding under one credit facility, all of which has been hedged with an interest rate swap for the life of the loan until its maturity in September 2024. Our leverage metrics continue to decline, with net debt trailing last 12 months EBITDA of 5.7 times and are expected to continue to decline as we repay $48 million in debt per annum. We have no scheduled capital expenditures until 2022, which is when three of our LNG carriers will undergo their special surveys. Our stable operating model has proved resilient in light of the COVID-19 pandemic. We project for the year adjusted earnings per common unit to amount to about 71 cents, assuming no common unit issuances under our ATM program, resulting in a projected 2020 earnings multiple of 3.4 times based on the current common unit price. Moving to slide eight, we are continuing to execute our strategy of organically deleveraging our balance sheet with our contracted cash flows, which has resulted in a drastic 55 percent reduction in interest expenses in Q3 2020 versus Q3 2019. We expect that as a result of the amortization requirement on the CRIT facility, our total projected net leverage will decrease from 5.7 times to 3.5 times in 2024 on a steady-state basis and assuming the Arctic Aurora is renewed at rates similar to its current contract. This deleveraging exercise will require some patience. As we deleverage, equity value will increase over time, positioning the partnership for the next step, including future growth. Moving on to slide nine, in this slide we show our fleet-wide cash flow breakeven per day per vessel versus our contracted time charter rates for the quarter. Our fleet cash breakeven rate for the quarter amounted to $48,300 per day per vessel versus our $61,000 per day per vessel contracted rates. That wraps it up from my side. We will continue the presentation with Tony Larson.