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0:11 Thank you for standing by, ladies and gentlemen. Welcome to Dynagas LNG Partners Conference Call on the Fourth 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. 0:44 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.

1:12 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 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.

1:45 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. 2:05 And now, I pass the floor to Mr. Lauritzen. Please go ahead, sir..

2:12 Good morning, everyone, and thank you for joining us in our three months ended 31st December 2021 earnings conference call. I’m joined 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. 2:40 Let’s move on to Slide 3 of the presentation. We are pleased to report the results for the three months ended 31st December 2021.

All six LNG carriers in our fleet are operating under their respective long-term charters. The COVID-19 outbreak is still causing operational and logistical challenges for the industry. Despite this, we are pleased to report a 100% utilization for our fleet for the fourth quarter of 2021.

3:12 For the fourth quarter of 2021, we reported net income of $16.9 million, earnings per common unit of $0.38, adjusted net income of $11.4 million, adjusted earnings per common unit of $0.23 and adjusted EBITDA of $24.7 million. 3:32 Our thoughts go out to everyone affected and suffering as a result of the crisis in Ukraine.

We continue to closely monitor this ongoing situation, including the implications of economic sanctions, trading and restrictions and other considerations that may affect our business. The partnership is in compliance with all applicable US and EU sanctions.

It is our understanding that the current US and EU sanctions regime have exempted -- have exempted certain LNG shipping operations and do not materially affect the business operations or financial conditions of the partnership.

4:13 Also, the partnership’s counterparties are currently performing their obligations under their respective time charters in compliance with applicable US and EU rules and regulation. Sanctions legislation is changing rapidly, and the partnership is continuously monitoring the ongoing situation.

4:32 I will now turn the presentation over to Michael who will provide you with further comments to the financial results..

4:39 Thank you, Tony. Turning to Slide 4. Our quarter results continue to reflect our stable contractually-based operating model as our fleet continues to operate with 100% utilization.

Adjusted net income for the quarter increased by 6.5% to $11.4 million compared to the fourth quarter of 2020 due to decreased finance costs and slightly higher voyage revenues for the quarter. 5:06 Our adjusted EBITDA amounted to $24.7 million, a 1.2% increase compared to the fourth quarter of 2020, and our adjusted EBITDA margin amounted to 69%.

Since our debt refinancing in the fourth quarter of 2019, we embarked on a comprehensive deleveraging path, having repaid, through the quarterly installments of our credit facility, $108 million in debt, resulting in a decrease in our net leverage to 4.8x from 6.6x, an increase in book value of our equity of 21% and a doubling of our profitability, with our profitability having stabilized at $0.23 earnings per common unit for the fourth quarter.

5:06 Turning to Slide 5. As of end of December, we had $567 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.

For the full year 2021, we generated $97 million in EBITDA, 70% of which was utilized for debt service, $44 million in adjusted net income and $80 million in operating cash flow.

6:27 Looking forward, we anticipate that our profitability will be impacted by the third special surveys and dry dockings of the three steam turbine LNG carriers, Clean Energy, Amur River and Ob River, which will take place in the first and second quarter of this year and which we expect will come in at a total cost of approximately $6.5 million per vessel, including installation of their respective ballast water treatment systems and excluding the off-hire during the dry dock period.

7:01 Moving to Slide 6. In line with our strategy of using our contracted cash flow to reduce leverage for the quarter, we utilized 68% of our unlevered cash flow to service debt and interest payments. Excluding working capital changes, operating cash flow for the quarter was $21 million.

After debt service payments and payments to preferred unitholders, we generated $5 million, excluding working capital changes and payments required under our interest rate swap for the quarter. And our cash balance increased by about $5.7 million to $97 million.

7:39 In this slide, we also show our fleet-wide cash flow breakeven per day per vessel versus our fleet contracted time charter rates for the quarter, which amounted to $63,600 per day per vessel.

For the quarter, we had a per vessel fleet average cash breakeven per day after all operating, G&A and debt service payments of $49,500 per day, with our contracted fleet time charter rate being 1.28x our fleet cash breakeven levels, excluding preferred distributions. 8:15 That wraps it up for myself. I will pass the presentation over to Tony..

8:20 Thank you, Michael. So let's move on to Slide 7. Our fleet currently counts six LNG carriers with an average age of about 11.6 years. The charterers of our vessels are substantial gas producers, namely Equinor of Norway, Gazprom Marketing and Trading of Singapore and Yamal Trade of Singapore.

As of 18th March 2022, the fleet's contracted backlog is about $1 billion, equivalent to an average backlog of about $166 million per vessel, and the fleet's average remaining charter period per vessel is about 6.9 years. 9:01 Moving on to Slide 8. Our strategy is to conclude long-term charters with LNG producers.

Our earliest potential availability will be in the third quarter of '23 for the vessel Arctic Aurora. The next available vessel may be the Clean Energy, which contract expires in 2026. Barring any unforeseen events and vessel scheduled dry dockings, our fleet is 100% employed for the remainder of '22, 96% for the year '23 and 83% for '24 and '25.

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

Two of the vessels, namely the Lena and Yenisei River, are under dry dock and OpEx cost pass-through contracts that in general provides for protection for reasonable inflation in operating expenses. 10:03 We are optimistic about the general market outlook for LNG shipping in the near, medium and long term.

We see growing demand for LNG that is traded on a global infrastructure that is under continuous expansion and now allows for efficient pricing of LNG and shipping. Natural gas is increasingly recognized as a source of energy that forms part of the solution to reduce global emissions.

10:28 When looking into the future demand for LNG shipping and LNG, it is impossible not to recognize current events in Ukraine as a potential watershed moment.

Although the long-term effects may still not be fully understood, what seems to be clear is that Europe will significantly increase the portion of LNG in their gas consumption profile at the expense of pipeline gas.

In 2021, Europe imported approximately 78 million tonnes of LNG compared to 90 million and 83 million tonnes in 2019 and 2020, respectively. However, during the first two months of '22, European imports of LNG has increased and is equal to an annualized 128 million tonnes.

11:18 With additional regasification capacity being announced by various countries across the European continent, we believe there is a significant upside to European LNG import demand.

We expect that the increased demand from Europe will be met with competition from Asian demand, which will therefore keep gas prices relatively high, which is often correlated with high shipping rates. In terms of LNG shipping availability, we have seen charters become very reluctant to sublet any vessels per term.

We believe the main driver for this decision is cargo value. As for example, $40 per MMBtu, the value of an ship cargo is approximately $150 million versus an FOB price in the US Gulf at around $30-plus million.

12:11 As a result, shipping cost becomes insignificant, and the charter's focus will be to ensure that their shipping needs are conservatively covered. As a result, the term LNG shipping market has seen a significant increase in shipping rates.

On the flip side, the LNG spot market is soft, although improving, as charters can show short-term shipping availability in the market as an optimization exercise. Under normal situations, increased European imports may lead to an overall decrease in shipping demand.

As for example, the US, Gulf to Europe is shorter in distance than the US, Gulf to Asia.

However, we believe that given the large amount of LNG required to cover for European pipeline gas, LNG producers will be required to operate at very high utilization, which coupled with high gas prices and conservative shipping portfolios, will result in a strong LNG shipping market in the medium and long term.

Another factor contributing to a strong shipping market is a significant increase in shipbuilding prices, driven by inflation and limited availability of LNG newbuilding slots. 13:29 Let's move on to Slide 9. We are an established and experienced LNG shipping company, which has a proven track record of safe and reliable operations.

Our fleet is unique as it provides for trading versatility. Our vessels can operate in sub-zero and icebound areas as well as in conventional areas, which we believe provides flexibility to our customers as well as a wide market reach to ourselves. 13:56 Our vessels are employed on term contracts that provide for significant and long-term cash flows.

During the past two years, we have embarked on a comprehensive deleveraging plan by utilizing our contracted cash flow to strengthen our balance sheet and build equity value over time.

It is worth to note that while our market cap is currently approximately $115 million as per yesterday's closing, our annual debt amortization amounts to $48 million per annum. We believe that this deleveraging process will provide the foundation for future growth initiatives.

The long-term market for LNG shipping is looking favorable, driven by increased LNG demand in years to come. Significant increases in newbuilding prices the past year due to limited shipyard capacity and inflationary pressures have been accompanied by a notable increase in time charter rates and charter terms.

Momentum for LNG has never been stronger, driven by the need for energy security, and the diversification of sources of supply as well as the role of LNG in the global transition into a lower carbon future, which LNG playing an integral role in achieving these objectives.

15:10 We have now reached the end of the presentation, and we now open the floor for questions. Thank you..

15:17 Thank you, we will now begin the question and answer session. [Operator Instructions]. We will now take our first question. Please go ahead. Your line is now open..

15:44 Good morning, gentlemen. This is Chris Robertson on for Randy Giveans from Jefferies. How are you. So the fleet is fully contracted this year, for most of next year so you should generate fairly steady and predictable cash flow.

So since the revenues are kind of locked in, can you talk about the other levers which you have some control over such as OpEx and cost? What's the impact of cost inflation at the moment? And what are you doing to control costs this year?.

16:15 Yes. Although we're in an inflationary environment, we don't think our operating costs will be materially affected. So we expect the cost will be, for this year, will probably be 2% to 3% up from 2021..

16:32 Okay..

16:33 Can I just add something to that? I mean, two of our contracts being the Lena and the Yenisei River, they are under cost pass-through contracts. So even if there is an increase in operating expenses, we will have those past -- we will have those increases passed through to the charter, of course, all within reason.

Normal inflation is, of course, a reasonable cost increase. Other things that we are actively doing to manage cost is that [Indiscernible] Dynagas LTD, our ship manager has owned training and recruitment centers around the major shipping hubs. And that means that we are very much in control of the crewing expenses, which is a significant expense.

And I think that's a good way of controlling the cost to the level that we can..

16:33 Okay. I guess building on my first question, so you mentioned in the release that you intend to use the stable cash flows to continue to delever the balance sheet and improve liquidity, setting yourself up for some future growth initiatives.

Can you talk a bit about how you're thinking about growth, what direction you'd like to take the fleet in and when? And would ordering a newbuild vessel be contingent on having a long-term contract in place first?.

18:10 Yes, thank you for that question. Look, the good news here is that time is on our side. We're building up equity value. We do that by the -- organically reducing debt. We do that -- I mean, relative to our market cap, it's quite -- it's -- we believe that this is very good of creating value going forward.

When it comes to fleet growth, we are getting closer, we believe, to a point where we will do something. So if that means buying a sponsor vessel or if that means buying a second hand vessel or if that means ordering a newbuild, that is yet to be seen.

And if we were to order a newbuild, it is most likely that, that would have to be covered by a long-term contract..

19:16 Got it. All right. Yes, that's it for us..

19:21 Thank you..

19:23 Thank you. We will now take our next question. Please go ahead. Your line is now open..

19:30 Hi Michael, this is Ben Nolan over at Stifel. Have a couple for you. So I wanted to, first of all, just to clarify on the dry docking days. I saw you have in there the time frame.

Are we -- should I model like 30 days for those each being out? Maybe 45, something like that?.

19:58 Yes. I think around 30 days should be [Multiple Speakers] Yes..

20:02 30 days. Okay, all right. That was easy. My next one is you talked about -- talked, Tony, about Europe looking to import more LNG and given the situation and everything else. We've been hearing a lot more activity around the FSRU market. Obviously, at the sponsor level, you do have two FSRUs, which I believe are operating as carriers.

But any sort of revised interest there, either to perhaps you were talking about buying things, maybe buy into FSRU or alternatively, your vessel comes off-contract next year.

Your thoughts about maybe marketing that as a conversion project or something like that?.

20:58 Yes. So look, I mean, there is definitely more interest in the FSRU space, and in particular, around the European continent, that’s definitely happening. We also -- I mean, we believe that, that's an interesting segment.

I mean, obviously, because of that development but also because there are other projects around the world where Europe will be a preferred location now, and so you have maybe a vacuum in other destinations.

21:35 Now as you pointed out, the vessels are charted out on term to some charterers that are not using them as FSRUs and they will run into next year. And I mean, that is something that we could consider.

But obviously, it is also something these vessels also something that our sponsor have been taking the risk for, carrying the risk since contracting until this moment. So I don't think that would be a very easy discussion.

22:22 Now when it comes to converting some of the units that we have coming off-charter in the future, that is definitely something we could look at. For example, for some of the designs, we have the conversion drawings ready so that is probably something that is more realistic..

22:48 Okay, that's helpful. And then lastly for me, just to -- you were pretty clear about it but just to make it absolutely crystal clear. So as it relates to your charters to Russian counterparties or counterparties that have Russian ownership, you're still 100% being paid and everything is up to date and so forth.

There's no -- I understand that the charters are still valid and good and not sanctioned and what so forth.

But in terms of cash flows, the cash is still coming in and I think is operating as it should, correct?.

23:27 That's right, Ben. That's right. I mean, what we've seen is that there's been some LNG shipping has not been at target. Therefore, sanctions that have been issued are not affecting us or our economic performance. They're also not targeting the LNG producers and the counterparties that we have agreements with.

So these charters are running as before the sanctions were issued..

23:59 Okay. Perfect. That's all I needed. Thank you..

24:03 You are welcome..

24:08 We have no further questions at this time. I will now hand the call back to Mr. Lauritzen for closing remarks..

24:14 We would like to thank you for your time and for listening in on our earnings call. We look forward to speak with you again on our next call. Thank you very much and stay safe..

24:24 That does conclude the conference for today. Thank you for participating. You may all disconnect..