Thank you for standing by, ladies and gentlemen, and welcome to Dynagas LNG Partners Conference Call on the Third Quarter 2021 Financial Results. We have with us Mr. Tony Lauritzen, 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. [Operator Instructions] I must advise you that this conference is being recorded today. Please be reminded that the Company announced its results with a press release that has been publicly distributed.

At this time, I would like to remind everyone that in today’s presentation and conference call, Dynagas LNG Partners will be making forward-looking statements. These statements are within the meaning of the federal securities laws.

This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995.

The statements in today’s conference call that are not historical facts, including, among other things, the expected financial performance of Dynagas LNG Partners’ business, Dynagas Partners LNG’s ability to pursue growth opportunities; Dynagas Partners LNG’s expectations or objectives regarding future and market charter rate expectations and, in particular, the effects of COVID-19 on the financial condition and operations of Dynagas Partners LNG and the LNG industry in general, may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934 as amended.

Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized.

I kindly draw your attention to slide 2 of the webcast presentation, which has the full forward-looking statement and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now, I pass the floor to Mr. Lauritzen. Please go ahead, sir..

Good morning, everyone, and thank you for joining us in our three months ended 30 September 2021 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.

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 3. We are pleased to report the results for the three months ended 30 September 2021.

All six LNG carriers in our fleet are operating under their respective long-term charters with international gas producers. The COVID-19 outbreak is still causing operational and logistical challenges for the industry. Despite this, we are pleased to report 100% utilization for our fleet for the third quarter of ‘21.

This is the sixth consecutive quarter included we have reported 100% utilization. For the third quarter of 2021, we reported net income of $11.3 million, earnings per common unit of $0.23, adjusted net income of $11.6 million, adjusted earnings per common unit of $0.24 and adjusted EBITDA of $24.8 million.

We paid in August 21 a quarterly cash distribution of $0.5625 per Series A Preferred Units for the period from May 12 to August 11, 2021, and a quarterly cash distribution of $0.546875 per Series B Preferred Units for the period from May 22 to August 21, 2021.

Subsequent to the quarter, we paid in November 2021 a quarterly cash distribution of $0.5625 per Series A Preferred Units for the period from August 12 to November 11, ‘21, and declared a quarterly cash distribution of $0.546875 per Series B Preferred Unit for the period from August 22 to November 21, ‘21, which is payable on November 22.

As previously announced, we were pleased to enter into a new time charter party agreement with Equinor for the employment of our LNG carrier Arctic Aurora. The Arctic Aurora was delivered to Equinor on September 15, 2021, immediately upon the expiration of the previous charter party.

The new time charter is about two years, and the annual gross revenues from the time charter agreement are expected to be about $21.5 million. Equinor has had the ice class and winterized carrier on charter since her delivery from builders in 2013.

Going forward, we intend to continue our strategy of using our cash flow generation to delever our balance sheet, reinforce our liquidity and generate cash as to build up 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 4. Our quarter results continue to reflect our stable contract-based operating model as our fleet continues to operate with 100% utilization.

Adjusted net income for the quarter increased by 14% to $11.6 million compared to the third quarter of 2020 due to decreased finance costs and operating expenses, and slightly higher voyage revenues for the quarter.

Our adjusted EBITDA amounted to $24.8 million, a 2.5% increase compared to the third quarter of 2020, and our adjusted EBITDA margin amounted to 71%.

Since our debt refinancing in 2019, our profitability has steadily increased and has now stabilized at current levels with adjusted earnings per common unit of $0.24 for the third quarter, reflecting our stable contract-based operating platform and financial profile. Moving to slide 5.

In line with our strategy of using our contracted cash flow to reduce leverage, for the quarter, we utilized 67% of our unlevered cash flow to service debt and interest payments. Excluding working capital changes, operating cash flow for the quarter was $20 million.

After debt service payments and payments to preferred unitholders, we generated $5.2 million, excluding working capital changes and payments required under our interest rate swap. And for the quarter, our cash balance increased by about $4.5 million to $91 million. Moving to slide 6. This slide highlights certain of our financial metrics.

As of end September, we had $579 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 steadily improve as we repay $48 million in principal under our credit facility.

We have no scheduled capital expenditures until 2022, which is when three of our LNG carriers will undergo their third special surveys and installment of their ballast water treatment plants. Slide 7.

We are continuing to execute our strategy of organically deleveraging our balance sheet with our contracted cash flows, which we believe is the only sustainable way of positioning the Partnership for future growth.

Compared with three years ago, we have reduced leverage by $143 million or 20%, and our net debt to last 12 months EBITDA has decreased from 6.4 times to 5 times and is expected to decline further to around 4 times by the end of 2023 on a steady-state basis. Moving on to slide 8.

In this slide, we show our fleet-wide cash flow breakeven per day per vessel versus our fleet contracted time charter rates for the quarter, which amounted to about $61,500 per day per vessel.

If we look at the breakdown, we have a per-vessel fleet average cash breakeven per day after all operating G&A expenses and debt service payments of $47,500 per day.

And our contracted fleet time charter rate is 1.3 times our fleet cash breakeven levels per day per vessel, excluding preferred distributions, providing us with a substantial cash cushion. That wraps it up for my side..

Thank you, Michael. Let’s move on to slide 9. Our fleet currently counts six LNG carriers with an average age of about 11.3 years. The charterers of our vessels are substantial gas producers, namely Equinor, Gazprom and Yamal LNG.

As of yesterday, 18th November ‘21, the fleet’s contracted backlog is about $1.06 billion, equivalent to an average backlog of about $177 million per vessel. And the fleet’s average remaining charter period per vessel is about 7.2 years. Moving on to slide 10. Our strategy is currently to conclude long-term charters with reputable LNG producers.

After concluding a new two-year charter contract with Equinor for the vessel Arctic Aurora, our earliest potential availability will be in the third quarter of ‘23 for the same vessel. The next available vessel after the Arctic Aurora may be the Clean Energy, which contract expires in ‘26.

Bar any unforeseen events and vessels scheduled dry dockings, our fleet is 100% employed for the remainder of ‘21, 100% for the year ‘22 and 96% for the year ‘23.

All the vessels in our fleet are employed on time charter contracts with assets strong counterparties, under which the charter pays major voyage-related variable costs such as fuel, canal fees and terminal costs.

Two of the vessels, namely Lena and Yenisei River, are on the dry dock and OpEx cost pass-through contracts that, in general, provides protection for reasonable inflation in operating expenses.

Although we do not have any immediate shipping availability, it is worth mentioning that Q3 ‘21 was a very active and healthy gas and shipping market, which is continuing into Q4. Competition over limited capacity, both in terms of gas and shipping is pushing prices up.

And we have seen a very strong spot market as well as both, medium and long-term TC fixtures concluded at higher levels than what has been reported for the last couple of years.

The demand for natural gas is driven by several factors, such as renewables producing less power than expected, limited supply of gas to Europe on the back of already low gas storage numbers, a general increase in demand in the Far East as well as typical end of Q3 stockpiling preparing for winter heating demand.

It appears that it is increasingly recognized that natural gas forms part of the solution for lowering greenhouse gas emissions. In response, we expect to see an increase in new LNG projects and an increase in demand for LNG shipping.

Although our charter income have not been affected by the COVID-19 situation as all of our vessels are employed on term contracts, we are monitoring the situation and outlook. From an operational point of view, we are taking strict measures to protect our seafarers, office staff and other stakeholders along the logistics chain. Moving on to slide 11.

Five out of our six LNG carriers have been designed, constructed in accordance with and are assigned with ice class 1A FS notation. These LNG carriers are also winterized down to minus 30 degrees.

While the ice class notation is, in part, concerned with the vessel’s hull and machinery and icebreaking capability, the winterization features are concerned with features that are installed to ensure trouble-free operation in subzero areas.

Our partnership and our sponsors represent a total market share of about 82% of the globalized class 1A FS equivalent LNG carrier fleet. Our fleet is frequently calling icebound and subzero areas, indicating our charterers are able to unlock the value of the ice class notation and winterization features.

The fleet’s typical area of navigation with regards to icebound and/or subzero areas are the Northern Sea route, where the vessels can operate during summer season, the Sakhalin and Northern Norway.

As our fleet can perform operations in icebound, subzero and conventional areas without any significant difference in operating costs between the two areas, we believe our fleet has a broader market reach compared to the same type of vessels without ice class or winterization features. Let’s move to slide 12.

We are an established and experienced LNG shipping company, known as a reliable service provider, able to perform core operations in particularly harsh environments. Our fleet is unique and provides for trading and versatility. Our focus continues to be on operational performance, which translates into high utilization and cost control.

Our vessels are employed on term contracts with key industry participants, which cash flow is largely utilized to organically reduce debt.

We expect that the solid contract revenue backlog of about $1.06 billion and competitive cost of debt will allow us to delever our balance sheet, reinforce our liquidity and generate cash as to build equity value and our cash position over time, which we believe will enhance our ability to pursue future growth initiatives.

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

[Operator Instructions] We will now take our first question. Please go ahead. Your line is now open..

Tony and Michael, it’s Randy Giveans from Jefferies.

How’s it going?.

Hi, Randy..

Hi, Randy..

Got a couple of questions here. I guess, first, kind of bigger picture. Your fleet, as you mentioned, fully chartered for two years. Where’s really focus for the Partnership now? Are there potential growth opportunities? There’s clearly been a lot of consolidation in the space in the last few months and quarters.

So, open to being a buyer or a seller of assets here?.

Randy, thank you very much for the question. We are in a very steady state. Time is on our side here. We don’t feel pressured to do anything. As you said, we are fully chartered out. We use the organic cash flow to reduce our debt going forward.

Of course, the point that we will do something is getting closer, and we will evaluate what that would be, but some form of growth seems to be the more nearby solution..

Got it. All right. And then, in terms of just a modeling question. Expenses, they’re trending down slightly 2Q to 3Q.

Is that a onetime thing? Is that differences with COVID kind of in the past now, or is this a new run rate? How should we think about that?.

No, I think it’s more of a onetime thing. I think, it’s not indicative of the run rate. There are inflationary pressures in general. And we do expect our operating expenses to trend slightly higher going forward..

[Operator Instructions] We have no further questions at this time. I would now like to hand the call back to Mr. Lauritzen for closing remarks..

We would like to thank you for your time and for listening in on our call. We look forward to speaking with you again on our next call. So, thank you very much, and stay safe..

Thank you. That concludes the conference for today. Thank you for participating. You may all disconnect..