Tony Lauritzen - CEO Michael Gregos - CFO.

Steven Tittsworth - Stifel Nicolaus.

Thank you for standing by, ladies and gentlemen, and welcome to Dynagas LNG Partners Conference Call on the First Quarter 2015 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 May 15, 2015. At this time, I would like to read the Safe Harbor statement.

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.

Investors are cautioned that such forward-looking statements involve risks 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 I’ll now pass the floor to Mr. Lauritzen.

Please go ahead, sir..

Morning everyone and thank you for joining us in our first quarter 2015 earnings conference call. I am joined today by our CFO, Michael Gregos. Yesterday, we issued a press release announcing our first quarter 2015 results. Certain non-GAAP measures will be discussed on this call.

We have provided a description of those measures as well as the discussion of why we believe this information to be useful in our press release. We are pleased to report the partnership earnings for the first quarter 2015, which are in line with our expectations.

In particular, we are focused on the performance of our fleet from a safety, operational and technical point of view. During the first quarter of 2015, we have again achieved a 100% fleet utilization, which is reflected in our financial results.

With our fleet fully contracted until the second quarter 2017, we continue to focus our intention on further fleet growth. The five LNG carriers currently owned by our Sponsor, Dynagas Holding Ltd, provides us with visible growth opportunities.

In addition and beyond these five LNG carriers, we believe the ongoing construction of additional LNG terminals and forecasted growth in LNG production will enable further commitment to LNG Carriers and other LNG infrastructure assets. Turning to Slide 3.

On April 21, 2015 the Partnership announced a quarterly cash distribution for the first quarter of 2015 of $0.4225 per unit which was paid on May 12, 2015, to all unit holders of record as of May 5, 2015. The cash distribution is equal to an increase of 15.8% over the partnerships minimum quarterly distribution per unit.

The increase is driven by the contribution to operating results from the two LNG carriers Arctic Aurora and Yenisei River which were acquired and delivered to the partnership on June 23, 2014 and September 25, 2014 respectively. Since our IPO in November 2013, we have paid to all unit holders a total of about $2.14 in cash distribution.

We are pleased with the results for the first quarter of 2015 for which adjusted EBITDA was $28.1 million compared to $16.5 million for the first quarter of 2014 representing an increase of about 70%.

The corresponding adjusted net income was $15.2 million which comprised well to $11.2 million for the first quarter of 2014 and the distributable cash flow was reported at $18 million compared to $12.3 million for the first quarter of 2014. Moving onto slide 4.

Since our IPO in November 2013 we have developed the company’s business profile and foundation to a great extent. The fleet has grown from three to five units through two dropdowns in 2014, which grew our capacity by 69% and thereby also our stream.

The distribution has been increased from an annualized $1.46 per unit to $1.69 per unit, which represents a total increase of 15.8%. Our 12-month forward run rate EBITDA has increased by close to 72% from $65 million to $110 million primarily as a result of expanding the fleet.

We have been focused on ensuring stability and visibility and have increased the remaining average charter duration from 3.5 years to 4.8 years. We have more than doubled our contract backlog which we have increased from $296.7 million to $636.7 million.

The average age of our fleet has been reduced from 6.3 years to 5.4 years through focusing on expanding the fleet with young tonnage. We have been active on the capital markets and been successful in raising capital when it was deemed sensible. At the time of our IPO, we raised $259 million in IPO proceeds, as well as $214 million in bank debts.

Post the IPO; we have raised a total of $502 million from follow-on offering, the issue of unsecured, notes, as well as securing bank debts. I will now turn the presentation over to Michael who will provide you with a detail comments to the financial results..

Thank you, Tony. Turning to slide 5, during the first quarter of the year the partnership continued to deliver positive results; utilization was 100% across the whole fleet. Our average daily higher gross of conditions amounted to about 80,000 per vessel and our average daily OPEC amounted to 12,200 per LNG carrier.

Net income for the quarter amounted to $14.9 million, adjusted net income which is net income adjusted for time charter higher amortization for the first quarter amounted to $15.2 million. Consistently with our previous press releases we feel that net income figures need to be adjusted for charter higher amortization.

Based on the above, for the first quarter of 2015, adjusted earnings per common unit amounts to $0.43 per common unit representing a 16.2% increase from the same period in 2014.

On Slide 6 you can see the first quarter 2015 results versus the same period of 2014, the 69.5% growth in revenues and 70% growth in adjusted EBITDA is driven by the growth of our fleet from three vessels in Q1, 2014 to five vessels in Q1, 2015.

Moving on to slide 7 to discuss distributable cash flow we started from adjusted EBITDA and after deductions for interest and finance cost net of interest income maintenance and replacement reserves, cash available for distribution is $18 million for the first quarter of 2015 representing an increase of 46.5% from the same period in 2014.

Distributable cash flow of $15 million for the quarter equates to a quarterly per unit distribution of $0.4225. This gives us the coverage ratio of 1.2 times, which is in line with our communicated coverage ratio target range.

Moving onto slide 8, at the end of the quarter we had approximately $42 million of cash on the balance sheet and $30 million in borrowing capacity under our revolving credit facility with our sponsor. Our total debt of $570 million comprises of the mix of $320 million secured bank debt over four LNG carriers and $250 million unsecured notes.

Our secured bank debt matures in 2021 and has annual amortization of $20 million per annum and our non amortizing $250 million, 6.25% unsecured notes are due in 2019. Our weighted average interest rate for the quarter amounted to 4.48%. Moving onto slide 9, this slide outlines our cash distribution history since we went public in November 2013.

Our Q1 distribution of $0.4225 per unit which is 1.69 annualized, reflects the operation of our current fleet of five LNG carriers and corresponds to a 15.8% increase from our minimum quarterly distribution and based on the [Indiscernible] closing price and 8.6% cash distribution yield.

We believe that our solid contract coverage and strong growth prospects are not currently reflected in the price of our units.

We expect that over the next couple of years our partnership can grow its distributions by 10% per annum and double its EBITDA base currently approximately 110 million as it acquires additional vessels from our sponsor or third parties. I will now pass the presentation over to Tony..

Thank you, Michael. Let’s move to slide 10 to summarize the partnerships current profile. The partnerships fleet accounts five LNG carriers with an average age of about 5.4 years in an industry where expected useful economic lifetime is 30 [ph] years.

We have a strong and diversified customer base with solid asset backed counter parties namely BG Group, Gazprom, and Statoil. These charters are leaders in their fields and only work with the top performing service providers. Our contract backlog is about 636.7 million and our average remaining charter period is about 4.8 years.

Let’s move to slide 11.We intend to continue to focus on accretive growth going forward. As you may know we have the right to purchase from our sponsor a further five optional vessels so we have a large sponsor asset base and substantial drop down growth potential.

Three of those vessels are already on the water and trading and the remaining two are under construction with delivery into 2015. All optional vessels are high specification, ice class, winter ice and extremely versatile.

These optional vessels include two vessels already long term charter to first class customers with an average five years employment. Over the two long term chartered vessels, one is chartered to our existing charter at Gazprom and one is chartered to Cheniere.

We are constantly evaluating new project opportunities that have the potential to provide us with additional growth beyond these five optional vessels. Moving onto slide 12, our fleet currently consists of five LNG carriers of which four have ice class 1A notation.

Our fleet is fully contracted in 2015 and 2016 and 80% in 2017, a time we expect the LNG shipping market to be very strong due to the current ongoing construction of new LNG production plant measured against a perceived relatively insufficient order book combined with an existing fleet that contains a large number of under sized vessels.

We have a unique fleet; it can handle conventional LNG shipping as well as trade in ice bound and sub-zero areas. This means that we are able to pursue business opportunities in two different markets, namely conventional shipping and a unique market for ice bound trade.

The driver behind several of our existing charters where the ice class features of our fleet as well the operational track record in such environments.

As an extension of the ability to operate in ice bound areas we are the only company in the world with a current capability and experience in transiting the Northern sea route which we deem an important trade due to the ongoing development of energy production along this route.

Our multiyear fleet employment profile diversified first class customer base and staggered maturity of our charters provide a solid cash flow visibility going forward. Moving onto slide 14, the current existing LNG world fleet consists of 406 vessels on the water and 145 vessels in the order book totalling 551 vessels as shown on the bar to the left.

The average cargo size today is about 143,000 cubic meters. If we add up all the vessels in existing road sea that size is below 139,999 cubic meters meaning well below the average cargo size. We count about 146 vessels which is about 36% of existing world fleet. The average age of these undersized vessels are also about 18 years old.

When we compare these on average old and undersized vessels with the order book we note that they account about the same number, further more as many as 127 vessels out of the order book of 140, 145 vessels have already been committed.

This means that there are very few new buildings that would actually be available to facilitate the need to replace on average old and small tonnage and to carry the incremental LNG production volumes in an environment where LNG cargo production capacity is expected to grow faster than shipping capacity.

Moving onto slide 15, well the energy consumption has been steadily increasing overtime. The largest sources of energy comes from coal, oil and gas. Since the early 1980s gas has been the fastest growing resource of those commodities.

Going forward we believe that coal and oil related consumption will be second rated to gas due to environmental reasons and gas consumption will continue to grow faster than coal and oil.

Based on current construction of new energy production terminals, the sale of LNG from new terminals under construction as well as project at new LNG production terminals we expect the next years and through the end of the decade to be dominated by strong production growth. 246 million tonnes of LNG was produced in 2014.

It is conservatively forecasted that 156 million tonnes of new incremental LNG will come to the market between now and 2020. This represents a total increase of 63% compared to 2014. The source of this new LNG is primarily from Australia, Southeast Asia, North America and Russia.

These production figures are conservative out of the 156 million tonnes of incremental annual production expected to be added to the market by 2020, 124 million tonnes are already under construction and 136 million tonnes already have sale purchase agreements or of take agreements in place.

Australian volume included in these projections has been estimated to 57 million tonnes and U.S. export volumes included in the projections has been estimated to 79 million tonnes. In aggregate, there are significant volumes coming from new projects that we believe will have a very positive effect on LNG shipping.

When we compare LNG supply to LNGs shipping capacity available from now until 2020 we remain confident that the market outlook for shipping looks favourable. By adding current LNG production and incremental LNG production, we forecast that by the end of the 2020 a total of 402 million tonnes of LNG will be transported per annum.

At current, the world LNG carrier fleet accounts about 406 vessels. This implies that one need on average about 1.65 LNG carriers to transport 1 million ton of LNG. As a result, we forecast a total need of about 663 LNG carriers by the end of 2020. The existing fleet and the order book represents a total of 551 LNG carriers.

As such the market may be short of 112 vessels to partially account for the incremental LNG going forward. It is this imbalance that will drive rate increases and that makes our vessels so desirable going forward.

Furthermore, it should be stressed [ph] that embedded in the existing worldwide fleet, about 36% may be considered sub-standard specification in todays’ environment due to their small size and their age of about 18 years.

Actual production in existing projects may also be higher than forecasted due to the potential materialization of additional LNG production projects. Also current underutilization of existing projects should be rectified over time. This will all lead to additional need for LNG carriers.

The potential re-charting possibilities for part of our fleet will be in 2017 at the earliest and beyond, which we expect to be a period of high total fleet utilization. This will be further supported by artic LNG coming on stream and requiring ice class vessels. Let’s move to slide 16.

We would like to conclude the presentation with why we believe our company is valuable to investors. Our fleet is fixed on time charter contracts with premium asset-backed counterparties thereby creating a secure visible and stable cash flow.

The Time Charter contracts are very powerful contracts in which the charters have to pay the owners a fixed day rate regardless if they use the vessel or not. And all major reliable voyage related costs offer charters accounts.

Our fleet is operated by our associated and reputable manager Dynagas LPG [ph] that has provided us with exemplary utilization rates. Our vessels are further more ice class and winterized which gives us the flexibility to pursue business on the conventional shipping market as well as on the market for ice and winter trades.

This is something that our peers are not offering and give us market fluctuation protection.

We believe that the transport for LNG has a bright future taking into account that ongoing construction and projection of new LNG production terminals, the composition of the existing global fleet and the order book where the growth in LNG production is forecasted to outpace growth in shipping capacity.

We are committed to growing our fleet further, so far and since our IPO in November 2013 we had grown the distribution by 15.8% and our target is to grow that ship use in on average by 10% plus per annum.

We have a strong balance sheet including a strong cash position and the mixture of secured amortizing debt and unsecured note supported by a larger portion of fixed interest rates. Our fleet wide breakeven is low and we had no debt maturities until 2019. We have now reached to end of our first quarter 2015 presentation.

And I’ll now open the floor for questions. Thank you..

Thank you. [Operator Instructions]. We have one first question that comes from the line of Ben Nolan. Please ask your question..

Hi. Yes. Thank you. This is actually Steven Tittsworth on for Ben Nolan. I was wondering if you could provide a little more color in terms of interest you’re seeing for your fleet because of the ice class specifications.

Is there enhance lower interest in charters going to be premium or are they really waiting to wait for that and see what happens in terms of market developments?.

I can see -- I mean, we can’t specify to where, but we can say that we already see interest for our vessels and specifically because of the ice class features..

Okay. Perfect..

And when it comes to paying a premium to the market or not, yes, I mean this is very unique market and one would expect that there would be a premium on that..

Okay.

Are you actually currently participating in tenders from LNG terminals that are in harsh winter environments right now?.

In general we – since this is a very close market, we are mostly discussing let’s say on a bilateral basis..

Okay. Perfect. That does it for my questions. Thank you..

And the next question comes from the line of Mattheus Becken [ph]. Please ask your question. Mr. Becken [ph] your line is now open..

Oh, sorry, can you hear me now? Hello..

Yes. We can hear you..

Okay. Perfect.

My first question was on the dropdown pipeline, I was wondering if you could give us a bit more color on the timing there and maybe if that had shifted due to he sort of like weaker rate environment and weaker sort of like low equity prices?.

Yes. Well obviously in order to do a dropdown we have to issue some equity and we don’t feel that issuing equity right now and what the units are creating is in the interest of our unit holders. So, we don’t feel there is a particular rush to do a drop down right now.

But having said that, nothing has changed in our strategy in terms of growth and what we want to do in the future..

Okay. That’s helpful.

And then I mean, in the weaker environment I was wondering if you have seen any sort of like interest being third-parties transactions and if that would be something that you might be interest in, I don’t maybe not on the MLP level but at the parent level if you could maybe give us some color there?.

Can you clarify your question?.

So, like I mean, if you see any third-party assets in the market, any other LNG Carriers by other owners would you might be interested in or if you’re focusing solely on organic growth through new builds?.

Okay. That was clear. We do believe that there are opportunities in the market for from third-party – you know, from third-party market participants to potentially acquire something.

We in general we have – we are having continues discussions for opportunities that could be in the interest for our partnership, but we can’t specifically mentioned anything particular..

Okay. And then my last questions on the market you mentioned all these older vessels and which were might bit too small into old.

And I guess my question is, how is that – what that’s a shift that these vessels actually go for scrapping and that we actually see sort of attrition in the fleet there as oppose to now where I guess scrapping has been fairly low in these vessel type?.

Yes. What we said was that in the existing fleet there is a significant quantity of vessels that are on average very old and certainly very small and they’re well below the average cargo size. And just in general, we see in here that these kinds of vessels are quite unattractive on the market.

So we do believe that absolutely there will be – that we will see scrapping of vessels going forward..

Okay. Well, that was it from me gentlemen. Thank you very much..

Thank you..

[Operator Instructions] And the next question comes from the line of Shawn [ph] Collins. Please ask your question. .

Great. Thank you. Good morning, good afternoon Tony and Michael.

How are you?.

Good morning..

Very good. Thank you..

Great, so, did you guys are fairly unique in having the ice class qualification in LNG ships. I believe still that the actual amount of ships that have used this route is still fairly modest.

Can you talk about your expectations for the likelihood of your ships to travel on the North Sea route this summer? And also when do you expect – what is your estimate for when you think that route might open.

I think it open to maybe mid-July last year?.

Yes. Correct. And that’s very good question. Thank you. We want to clarify that our fleet ice class and winterization feature is not only attractive for this route – for the Northern Sea route. It is also very attractive in general for location of terminals that are very fine.

For example, one of our vessels are charted to Statoil, which is currently the most Northern production plant.

So, the majority of the cargo that we transport out of Norway is not going through the Northern Sea route, but certainly one of the – let’s say, driving factor of Statoil securing that charter was because of the ice class and winterization features that was valuable for Statoil regardless of the route or not.

Also for several other vessels that we have that are on to Gazprom, they typically load cargo in Sakhalin which is North of Japan and is a terminal where in the winter its fully covered – fully ice bound and you do need an ice class carrier.

So, again it’s crucial for the vessel to be ice class and winterized and that was again a major driver for Gazprom to secure these charters.

So, I think that when we speak about the Northern Sea route that’s really just an extension of our ability to trade in ice bound because when you go through the Northern Sea route that’s definitely different playing field, it’s certainly more challenging than what it is to trade to conventional ice bound terminals.

But speaking more about the Northern Sea route and what we expect there. We do expect the transits to increase going forward. Of course this depends very much on the price, the gas pricing and the arbitrage between the Atlantic Basin and the Pacific Basin. So of course that is something that is very difficult to predict.

Last summer there was almost no arbitrage really, so there was no need really for the vessels to go through the Northern Sea route. But still again several of our charters utilize the ice class into winterization features of the vessels just at their load plant.

So, when we – yes, when we look at this going forward, we think that’s the fact that we have been through the Northern Sea route, that’s the only company in the world several time we think that it had more of a substantial strategic benefit because there are LNG production facility that are being developed right now for production in the future.

And we do think that will be potentially good fit for our company like ours. Thank you..

That’s helpful color, the strategic value and nature and somewhat optionality and flexibility that that makes a lot of sense, so I appreciate that color, Tony..

You’re welcome..

Second question, I’m just wondering you got the Clean Ocean signed up [Oceania], I maybe a little guilty here of not being on top of the situation.

But just wondering if there’s any new color on the timing over or the plan for [Oceania] to open and how that – how you’re thinking about that?.

Yes. The Clean Ocean is on charter to Oceania and she will commence her charter in a couple of weeks from now and that is something that we’re very excited about of course. So, we understand that the actual production of the plant is due somewhat later than that. But that’s we understand the terminal is in good track for production et cetera.

They need some – they need quite some time for the commissioning of their plant before they do their commercial exports. But, yes, I think according to Oceania they are much on-track for their sort of -- exports..

Great. That’s great to hear. That’s helpful. Thank you very much. Thank you very much, Michael..

You’re welcome..

Thank you. Bye-bye..

We now have a question from the line of Beck Brooks [ph]. Please ask your question..

Hi, guys.

Can you discuss your updated thoughts on your leverage target and timing around achieving that target?.

Hi. As we have said in the past under a normalized environment we would – going forward we would expect that we would proceed with – let’s say, as a slight balance sheet deleveraging, but that’s under normal circumstances. I can’t give you specific target right now, because it really depends on where our stock is trading and many other factors.

But as I said, under a normalized market environment slight balance sheet deleveraging, we might opportunistic in the short term if it made sense to increase leverage going forward and then deleveraging the future, but that something that we would – it would be in a case-by-case basis.

Our base case has not changed right now that we would expect to have as we dropped down vessels, slight balance sheet deleveraging..

Do you discuss what you call normalized conditions? You’re talking about capital market conditions, shipping market conditions what is that?.

No, no, no, I’m talking about capital market conditions and I’m referring specifically to where our market cap is and how the market is valuing our company, which is hugely important..

Okay. Great.

And one other question for you, you guys give a quick rundown of the assumptions on liquefaction growth on page 15, is there any chance if you quickly re-summarize that?.

Yes.

So, I mean, what was you question on page 15?.

You gave quick rundown of the assumptions which you guys have used to come up with your forecast on liquefaction growth?.

Yes..

You can just re-summarize that quickly?.

Yes. Sure.

I mean, you mean the slide itself or the contents of the actual liquefaction growth?.

To go from 246 to 402, I think you said there is 57 -- U.S.?.

Okay. Yes. We’ll do that. Sure. Yes, exactly. So basically the current LNG production is 246 million tonnes and that’s based on 214 volumes. Then we have made a forecast of how much production we believe will be added incremental to the current production volumes by 220. And by including the majority – by including several Australian projects and also U.S.

exports project, and some Russian and other Southeast Asian volumes, we come up with the number 156. In particular from Australia we are factoring in the Queensland Curtis, Gladstone, Asia Pacific LNG, Wheatstone, Gorgon, Ichthys and Prelude.

And from the United States in particular including Sabine Pass, Cameron, Freeport, Lake Charles, Cove Point and Corpus Christi. And that really account for quite a lot of the 156 incremental volumes.

What we also wanted to look at from a risk perspective and what I mean by that, I mean that what are the chances of these 156 million tonnes actually reaching the market.

Now one thing that we wanted to look at was that well, how much of the 156 million tonnes, I mean, how much of that is actually under construction right now or you know if you look at all projects worldwide for LNG production, how much is under construction.

Well, we’ve been given the figure that 124 million tonnes equivalent is under construction right now.

Then we also looked at well, all the new projects how much of that is basically sold, that means, that they have sale purchase agreement in place or have an off take agreement, and the result is that 136 million tonnes are sold or retained by the developers, which we feel is a good high number compared to 156 million tonnes in total to be produced.

So, what we did was that we also – we multiplied -- well, we add on – we added the current LNG production which is 246 with a total expected incremental LNG production which is 156. Then we get to the number of 402 million tonnes by the end of 2020.

We’ve multiple that by the factor of 1.65 LNG Carriers per million tonnes, because that is what we estimate is needed to carry 1 million tonne of LNG. Then we get to implied total LNG Carrier demand of 663 vessels.

When we then estimate that the market in the future will then need 663 vessels in total, well, then we see out of though how much that the existing fleet cover of that and how much that the order book cover that and then we see on slide 15 on the right hand side that about 112 vessels, you know, basically the market going forward could be short of 112 vessels taking into account this production quantity.

Does that make sense?.

Yes. That’s great. Appreciate it..

You’re welcome..

We have no further questions at this time. Please continue..

Okay. Thank you everybody for listening in on our first quarter 2015 presentation. Thank you very much..

That does conclude the conference for today. Thank you all for your participation. You may now disconnect your lines..