Tony Lauritzen - Chief Executive Officer Michael Gregos - Chief Financial Officer.

Steven Tittsworth - Stifel Randy Giveans - Jefferies Fotis Giannakoulis - Morgan Stanley.

Thank you for standing by, ladies and gentlemen, and welcome to Dynagas LNG Partners Conference Call on the Fourth Quarter of 2016 Financial Results. We have with us Mr. Tony Lauritzen, Chief Executive Officer; and Mr. Michael Gregos, Chief Financial Officer of the Company.

[Operator Instructions] I must advise you the conference is being recorded today. At this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contain certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect Dynagas LNG Partners's business prospects and results of operations. Such risks are more fully disclosed in Dynagas LNG Partners filings with the Securities and Exchange Commission. And I now pass the floor to Mr. Lauritzen.

Please go ahead, Sir..

Good morning, everyone, and thank you for joining us in our fourth quarter and full year results, ended 31 December, 2016 earnings conference call. I am 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.

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. We're please report the Partnership's earnings for the fourth quarter and full year 2016.

In particular, we are focused on the performance of our fleet from a safety operational and technical point of view, and we are satisfied to report that during the said quarter, our fleet again reported 100% utilization, which we believe is reflective of the quality of our fleet and our managers' operational ability.

The fourth quarter and full year ended 31 December 2016, were strong financial periods for the Partnership. Our fleet's income is produced from multiyear time charter contracts with international energy companies, who pay a fixed daily rate for the chartered vessels.

As the charters also pay the majority of variable costs, such as fuel, the Partnership enjoys steady and visible cash flows that are not indexed to oil or gas prices.

Turning to slide 2, a quarterly cash distribution for the fourth quarter of 2016 of $0.42 and the quarter per common man and supporting unit was paid on generally 19 to all unit holders of record as of January 11, 2017. The cash distribution is equal to an increase of 15.8% of the Partnership's minimum quarterly distribution per unit.

The Partnership paid on February 12, 2017, a cash distribution of $0.5625 per unit of its Series A Preferred units for the period from November 12, 2016, to February 11, 2017, to all unit holders of record, as of February 5, 2017.

Distributions on the Series A Preferred units will be payable quarterly on the 12th day of February, May, August, and November, and an equivalent of $0.5625 per unit, provided the same is declared by the Partnership's Board of Directors.

On January 23, 2017, all conditions were met for the expiration of the subordination of 14,985,000 subordinated units owned by our sponsor. Applicable from the same date, these subordinated units have been converted into common units on a one-to-one basis. Therefore, the Partnership now has 35,490,000 issued and outstanding common units.

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 3, of the presentation. It was another very good quarter during which we continued to deliver positive financial results. We had significant increases in revenue, EBITDA, and distributable cash flow driven by solid utilization levels and efficiencies that resulted in lower vessel operating expenses.

For the quarter, we generated distributable cash flow of 21.3 million, an increase of 18% from the fourth quarter of 2015, and our fleet average charter hire gross of commissions on the cash basis amounted to about $78,250 per day per vessel.

Our average operating expenses amounted to about $12,150 per day per vessel, which coupled with the 100% utilization for the quarter, is a testament to the operational capabilities of our manager, Dynagas Ltd. Our total cash flow breakeven excluding cash distributions, amounted to about $45,400 per day per vessel.

On Slide 4, you can see the fourth quarter and full year 2016 selected operational and financial results, versus the same period of 2015. The key takeaway is that our financial performance was significantly enhanced following the Lena River acquisition with its related time charter in December 2015.

Moving on to Slide 5, to discuss distributable cash flow and our coverage ratio. You can see that we continue to outperform our target coverage ratio.

Our coverage ratio for the fourth quarter was 1.3 times however, we do expect our coverage ratio to decrease the next two quarters, since three of our steam turbine LNG carriers, will undergo their five-year special surveys in April, June and July of this year, and the Clean Energy will be trading in the short term market until she is delivered into the Gazprom contract, in about July 2018.

Even though on a longer term basis, our coverage ratio will naturally decline, as some of our vessels roll off their existing time charters to new contracts with lower time charter rates, our distribution remains sustainable, given the contract length has increased significantly.

Moving on to Slide 6, just a few words on our capital structure and liquidity. As of December 31, we had about 82.6 million in cash on hand, and 722.5 million in total debt, and total available liquidity of 113 million. We believe our leverage is supported by our significant contract backlog going forward.

Slide 7 shows our total principal and balloon payments per annum. We do not have any near term maturities, since our first maturity is our 250 million unsecured note, which matures in October 2019.

Given our 1.6 billion contract backlog, we do not anticipate any difficulties in refinancing our unsecured note before it due date in late 2019, especially given that by that time, the two Yamal time charters for the Lena River and Yenisei River, will have either commenced or will be very close to commencing.

Slide 8 outlines our cash distribution history since we went public in November 2013. Since our IPO, we have paid total cash distributions to common unit holders of about $5.10 per unit, and have grown our total cash distributions by about 16%.

Last year, we decided it was prudent to maintain our distribution, since we felt the market did not reward distribution growth by way of a reversion to a tighter equity cost of capital.

As, we have been conservative, and have been mindful the dropdowns for the sake of increasing distributions at unattractive cost of equity will not increase shareholder value in the longer term.

We have been in an environment where the equity market have opened albeit that valuations, which are not attractive to us just yet, given the current yield of 10%, we will be focused on balance sheet management, so we cannot say when our next drop down will take place, but it will be a function of our equity cost of capital, and when we see evidence that the equity market is rewarding growth and distributions by a tighter equity yields.

That wraps it up from my side, I will pass the presentation over to Tony..

Thank you, Michael. Let's move on to slide 9 to summarize the Partnership's profile. The Partnership's fleet currently counts six high specification and versatile LNG carriers, with an average age of about 6.6 years in an industry where expected useful economic lifetime is 35 years.

We have a diversified customer base with energy companies, namely Shell, Gazprom, Statoil and Yamal LNG. Our contract backlog is about 1.56 billion, and our average remaining charter period is about 10.7 years, which compares well to our peers. Moving on to slide 10. Five out of the six vessels in our fleet have ice class 1A notation.

Our first opening is from Q2 this year, and we are working towards sourcing suitable employment for the Clean Energy for the gap period, prior to her delivering into her long term charter with Gazprom. We have a unique fleet, it can handle conventional LNG shipping, as well as operate in ice bound and sub zero areas.

This means that we are able to and have been successful in pursuing business opportunities in two different markets, namely conventional shipping and a unique market for ice bound trade. The LNG and our sponsor jointly owns 81% of the world's ice class 1A LNG carrier fleet.

As an extension of the ability to operate in ice bound areas, we are the only company in the world with the current capability and experience in transiting LNG carriers via the Northern Sea route. Which we deem an important advantage due to the ongoing development of LNG production along this route.

The contractual relationship between our customers and the vessels are on a time charter basis, under a time charter of party the charterer pays a fixed day rate to the owner, regardless if the vessel is being used or not, and all major variable costs, such as fuel cost, are for the charterer's accounts.

Therefore, and coupled with our multiyear employment profile, the Partnership enjoys a visible and secure revenues that are not directly affected by oil or gas prices. Let's move to slide 11. Our potential dropdown candidates count nine LNG carriers, all of those vessels have contracts in place, amounting to a multibillion dollar contract backlog.

They are high specification ice classed and winterized. Four of the vessels are Arc-4 type, 162,000 cubic meters, and delivered from the yard. The remaining five vessels are Arc-7 type, 172,000 cubic meters, and currently under construction at DSME in Korea, for delivery in 2017 and 2019.

These last five vessels are 49% owned by our sponsor, and 25.5% each by Sinotrans and China Energy Shipping. Let's move to Slide 13. In a summary the market is in a place where there are substantial volumes of additional LNG expected to be produced in the near to medium term.

The world LNG carrier fleet is characterized by few vessels to carry those incremental volumes in the long term, and there are many old technology vessels. Also, there has been a slowdown in the ordering of LNG carriers, with marginal activity since Q3 2015. Also, floating regasification projects appear to create accelerated demand for unsold LNG.

The current existing LNG world fleet and the order book, including FSRUs, and FSUs, totals about 566 vessels, as shown on the table to the left on Slide 13. The order book counting 116 vessels is about 25% of the world fleet. A significant part of the world fleet is aged and small.

At some point, we expect that most of the undersized and aged vessels will fade out of the market and be replaced with larger and younger tonnage. Furthermore, 85% of the order book has already been committed for employment.

This means that there are very few new buildings that may be available to facilitate the need to replace on average undersized and aged tonnage, and to carry expected incremental LNG production.

According to the order book, most new builds will be delivered during the period 2017 and 2018, which is also a period we expect significant additional LNG production. We've seen a slowdown in ordering activity of LNG carriers. To our knowledge, there has only been recorded five orders since Q3 2015.

There are only very few yards in the world that have the experience and capability to build LNG carriers, and if one were to order today, our guess is that yards would be able to offer tonnage for delivery in 2019 at the earliest. Let's move to Slide 14. We are now in a period dominated by strong incremental LNG production growth.

It is conservatively forecasted that 150 million tons of new annual incremental energy will come to the market between now and 2021. This represents a total increase of 56% compared to 2016 production. It is also assumed that project utilization will improve going forward.

We assume that the vast majority of new LNGs coming from terminals already on the construction, meaning a high probability of project materialization. The source of this new LNG is primarily from Australia, North America, Southeast Asia, and Russia.

We continue to believe that the Far East will remain the largest buyer going forward however, the largest incremental demand growth may be from European markets. We also believe we will continue to see the emergence of new niche markets in areas such as South Asia, Middle East, and South America, where large volumes will be imported by FSRUs.

We believe there are sufficient buyers for the new LNG to be absorbed; the majority of the new energy export volumes have sale agreements or off-take agreements in place. We believe that existing import markets will continue to increasingly rely on LNG as a price competitive and clean energy resource. Let's move to Slide 15.

In 2016 global energy trade was up 9% from 2015. As expected in particular, Australia and the U.S. have been the largest incremental producers so far, and are expected to add significant further volumes going forward. Let's move to slide 16. With the U.S.

projected to become one of the world's largest exporters of LNG, it is worthwhile to analyze where those volumes have been shipped to so far.

Sabine Pass produced 60 cargos between February 2016 and January 2017; 33% of the volumes went to South America, 17% to Central America, 12% to Europe, including Turkey, 17% to the Far East, 13% to the Middle East, and 8% to India. Initial analysis indicates that Sabine Pass requires 1.75 vessels for every million ton of LNG produced.

Let's move to slide 17. The LNG trade is experience a tremendous change. This is in particular evident when analyzing the LNG trading routes. In the year 2000, there were only 43 country to country trade routes. By 2016, this number had increased to 255.

23 new import markets have opened since the year 2000, we may see that with an increased number of LNG producing terminals that are located in the Atlantic, Middle East, and Asia Pacific, and with a convergence of LNG prices between buyers, that LNG becomes increasingly intra basin traded, and consequently conventional sized LNG carriers becomes increasingly in demand.

Let's move to slide 18. LNG has become an important energy resource due to its environmentally friendly properties and availability. We experienced new markets emerging, in particular, via FSRU imports, that allows for prompt market access. In 2016, 22 million tons, equivalent to about 8% of the worldwide production, were exported to new markets.

And the majority of those volumes were discharged via FSRU terminals. Jordan, Egypt, and Pakistan were the most significant growth markets in 2016. Let's move to slide 19.

Although most incremental demand going forward will come from land based terminals, the FSRU landscape is interesting, because it develops very quickly and is accelerating LNG demand growth. The FSRU market has grown steadily over the past years.

In 2016, floating regas made up 15% of total regas capacities, this number is expected to increase to 17% within 2020, which does not include the more than 50 proposed FSRU projects.

When we compare LNG supply to LNG shaping capacity available from now and forward, we remain confident that the market outlook for shipping looks favorable in the long term.

In the period prior to that, we believe the short term market in general may create competition to the long term markets, also sufficient LNG supply is outpacing LNG shipping capacity. The growth in LNG productions at 56% within 2021, is estimated to outpace increase in LNG shipping capacities set at 25% within the same period.

The majority of the new LNG will be delivered already within 2019, meaning we should expect a period ramping up to that point and subsequent years to result in an improved and increasingly healthy shipping market.

Additionally, the Partnership's fleet is largely ice classed and winterized, enabling the flexibility to pursue the best of two different markets, which has proven to be a strong advantage, so far.

With our fleet, 86% contracted through 2017 and 75% contracted through 2018 and 2019, with an estimated fleet wide average remaining contract duration of 10.7 years, we intend to continue to focus on obtaining additional contract coverage, particularly in 2017, managing our operating expenses and continuing the safe operation of our fleets.

We have now reached the end of the presentation, and I now open the floor for questions. Thank you..

Thank you very much indeed sir. [Operator Instructions] And we have a question from Ben Nolan from Stifel. And your line is now open..

Hello. This is actually Steven Tittsworth on for Ben Nolan. Thank you for taking my call. I just have a couple of questions. The first one, thank you for the great commentary on the regasification market, you have been talking about it for some time.

I was wondering if you could give just a little bit more color in terms of how you're thinking about that market in terms of a conversion or potential new build contract..

Yes, thank you very much.

It is true, we have been commenting on that market for some time and the main reason for us commenting on that market is because the FSRU market is accelerating the demand growth so when you see unsold LNG in the market and a slowing demand from traditional buyers, we see that slack has been picked that by the FSRU market which is very quick market..

Right..

At the moment. When it comes to our ambitions in entering the FSRU segment with tonnage, that’s a different question. We have commented previously we were looking to convert the Clean Energy into a FSRU, but since we were successful in securing a long term charter on that vessel, that did not require any CapEx expenditure.

We opted for that because we felt that was a better strategy. And when it comes to potentially ordering vessels from a new building point of view, that is of course something that needs to be done on a sponsor level. And that is something that is very much being considered at this moment..

Okay. Perfect. My next question deals with like you said the clean energy.

There is a little bit of a gap between when the contracted time now and when the next one begins also a little bit of gap and some other vessels in your fleet, how are you thinking about that potential time period, in terms of short term charter or just operating the stock market?.

Yes. The first ambition on securing a charter for the Clean Energy would be to fill the entire gap, here which is between the redelivery from Shell coming on, until she goes on charter to Gazprom and July next year.

We would much prefer that compared to trading her voyage by voyage and then something that we are actively looking at and actively pursuing at this point in time.

We also have to gap periods coming up in 2018 which is a point in time we believe the shipping market will be much stronger than what it is now so it is not something we pursue at this point and we would rather wait to pursue those opportunities and focus on the clean energy. Yes..

Okay. Perfect. My last question deals with continued sponsor support and I know you have the $30 million credit facility coming from them.

Be anticipate the sponsor will continue to support cash flow just to keep distribution flat in order to potentially support further dropdowns later in the future?.

Of course, the sponsor is there to support the Partnership and I think at this particular point in time the Partnership is in pretty good shape on its own. Going forward, beyond that, obviously we have to drop vessels down in order to be able to sustain an increased distribution.

We have the luxury of the time to be able to wait for a more attractive cost of capital. At the end of the day, you are right, the sponsor is there to support the Partnership..

Okay. That is it for me. Thank you for your time..

Thank you very much indeed. Now from Jefferies, your next question comes from the line of Randy Giveans. Your line is now open Sir..

A few quick questions for you said average was 12,100 per day.

Do you have a guidance for 1Q '17 now that the guarantees of expired?.

Yes, I think if we want to be conservative, for the turbine vessels we would leave it more or less the same at around that number and maybe the DFD vessel around 13,000..

Okay. All right.

Looking at a different slide but you are showing 83 million cash and about 130 million and total liquidity and it was always a more than a to cover equity portion of a dropdown, you have a timeframe for the next drop-down or maybe a target cash balance our target yield?.

No, we do not have a specific timeframe. As I said it is preconditioned and I think we will need to raise equity for the next drop down which is why we said the transaction is good and the timing of the transaction will be a precondition and what level can we raise equity.

I think at the end of the day, the market and the equity yields will tighten and we will be able to drop down the vessel accretively..

Okay. That is fair. Lastly, thank you for the guidance for 2017.

I think you said April and June and July, what about 2018, I know you have 2013 build vessels coming up for five year survey next year?.

Yes. That is right. We have three ships which are coming in and 2018. Essentially after 2018, we are clear for the next five years..

Okay.

So it is pretty much the content and the main river next year?.

That is right..

That sounds great. Thank you again for the time..

Thank you very much. The next question comes from the line of Fotis Giannakoulis from Morgan Stanley. And your line is now open..

Hello, gentlemen this is Ben stepping in for Fotis. Thank you so much for taking my call. So in your presentation you gave some great color on both new and existing LNG demand centers. So I wanted to ask are you at all surprised with where some of these volumes have landed notably it seems like the U.S. to Asia route has surprise the upside.

So I'm just curious on your thoughts on how you expect the global trade to shift or evolve over the next couple of years?.

Yes. Thank you very much. We are a bit surprised to see the trade paths and how they have emerged. I think it's very positive that we have seen a lot of unforeseen demand, demand that has presented itself with not a lot of pre-warning. I think that’s very positive.

As we said in the presentation, we do actually expect that with the Atlantic basin primarily with the U.S. becoming a very large producer, then you have the Middle East being a strong producer with Qatar and in the Pacific, you have Australia soon taking over the role as the biggest producer in the world.

We think it's logical that may be LNG to a greater extent versus today that you will be traded intra basin so we see a lot of cargoes produced in the Atlantic remaining in the Atlantic. Cargo produced in Middle East remaining in the Middle East region also going to India and Pakistan.

And then for example, Australian volumes remaining in the Pacific, of course a lot of this is regulated by existing sales contracts and that will, to some extent, limit the intra basin trading.

But we do think it will be logical for this to happen and when there is more infrastructure in place, there are LNG trade routes that have exploded basically in numbers, we have many more loading in discharging facilities just over the last years.

As a result, we are seeing price convergence between the different LNG [Hubs] and therefore we do believe that we will see more intra basin trading, which basically means that the need for the very large ships will be limited compared to what we believe previously and therefore conventional size LNG carriers will be more and demand.

That is our thesis..

Thank you. That’s very helpful. Just one last question on the market. Within this market we have seen a number or we are seeing the number of spot fixtures ramp up in the past few years, increasing liquidity there.

Is this a trend in which you expect to continue and what sort of impact you think this will have on short term rates perhaps in the relation to long term rates? And the ability to contract a vessel longer term, does it also affect the contracts duration you may be seeking?.

Yes. Thank you. That is a very good question. Yes, definitely. The number of spot fixtures and short term fixtures have increased year on year for quite a long period of time. It feels like we are always every year we get to a new record and a number of spot fixtures.

There are several reasons for that and in the past it was not very common for LNG to be sold spot. It was the finance years of loading and discharge term and they would not even allow it because they wanted all volumes contracted et cetera.

Now, there is obviously much more flexibility in that because from time to time you see the spot cargoes selling at a great premium to long term gas and right now it is the opposite of that but in history, we have seen spot cargoes with tremendous premium above long term gas.

Just in general, I think finance year are allowing spot cargoes to a greater extent than previously.

Also, when we look at the demand for gas, we see as we talked about in the presentation, we have new buyers of gas and a lot of countries are importing gas via FSRU and maybe a lot of those countries who are late in the energy planning and several of those countries maybe do not have strong credit rating and their ability to buy long term gas may be limited which is also favoring them buying more spot cargo versus long term cargo.

We do think in general, it is a trends for the spot market to keep on growing.

With that being said, the large producers, the portfolio players, they need to have control of their own shipping and they very often prefer to work with a ship they know and work with a ship owner they know because and gas you have take or pay contracts which basically at worst can mean if a vessel is nominated to load a cargo and it misses the loading window, you have to pay for the cargo.

There is no recourse to the owner and that but never the less it means the buyer of that gas, they really want to make sure the vessel is in tiptop shape and the owner knows what they are doing so with all likelihood, the LNG will be loaded. Still, you see a lot of preference for charterers to work with owners they know are doing a good job.

You also have an LNG, you have this market and for example our fleet is fully ask last ice classed and winterized and they are for example in the world today and there are only 11 LNG carriers that are ice class IA and DLNG together with our sponsor owns nine of those.

And these vessels are often used for very particular trade where there is a limited availability of LNG carriers that are able to do that job. And as a result, we have seen in Dynagas, we have been very able to charter out long term contracts..

Sure. Thank you very much for the time and very thorough color. I really appreciated it. .

[Operator Instructions] And as there are no further questions I shall now hand the floor back for closing remarks..

Thank you for your time and for listening in on our earnings call. We look forward to speaking with you on our next call. Thank you very much..

Thank you very much indeed sir, with many thanks to both our speakers today. That does conclude the conference. Thank you all for participating. You may now disconnect. Thank you gentlemen..