Monaco-based Dynagas LNG Partners announced on Wednesday, April 18, that, following a strategic review of its financial profile and distribution policy, the Board of Directors has approved a plan to reduce the quarterly distribution on the Partnership’s common units to $0.25 per common unit from $0.4225 per common unit, or from $1.69 per common unit to $1.00 per common unit on an annualised basis.
The reduction will take effect on May 3, 2018, upon the payment of the common unit distribution with respect to the first quarter of 2018 to common unitholders of record as of the close of business on April 26, 2018.
Tony Lauritzen, Chief Executive Officer of the Partnership, said: “This decision by our Board of Directors to reduce the level of the Partnership’s quarterly common unit distribution is necessary to align the Partnership’s distribution level with its capacity to generate cash flow in the long term. Despite the material increase in the Partnership’s estimated revenue contract backlog over the last two years, we have experienced a decrease in operating cash flow and a weakened distribution coverage ratio (which is our distributable cash flow available for distribution in proportion to actual cash distributed) following our shift to longer term charters for the employment of our liquefied natural gas carriers, which provide us with greater cash flow visibility albeit at lower charter rates that provide attractive returns of capital.
“As the Partnership’s shorter duration time charter contracts at peak charter rates have expired or are approaching expiration, we have capitalised on our Manager’s operational track record and the versatility of the ice class LNG carriers in our fleet to secure long term employment contracts. During the last two years, the Partnership has been successful in securing a ten year contract for the employment of our 2007 built LNG carrier, Ob River, two fifteen year contracts for the employment of our 2013 built LNG carriers, Yenisei River and Lena River, an eight year contract for the employment of our 2007 built LNG carrier, Clean Energy and a three year contract for the employment of our 2013 built LNG carrier, Arctic Aurora.
“Today our average remaining contract term is 10 years and our estimated contracted revenue backlog is approximately $1.5 billion, which highlights our ability to secure long-term contracts in periods when the LNG shipping market has been highly competitive.”
Mr. Lauritzen added: “The Partnership’s Board of Directors believes that the new distribution level is in the best interest of the Partnership’s common unitholders as it aligns the Partnership’s cash flows with our cash payment obligations.”
Dynagas LNG Partners is a growth-oriented partnership formed by Dynagas Holding Ltd., its sponsor, to own and operate liquefied natural gas carriers employed on multi-year charters. The Partnership’s current fleet consists of six LNG carriers, with an aggregate carrying capacity of approximately 914,000 cubic metres.