Dynagas LNG Partners is eyeing a currently difficult spot market for LNG carriers but believes conditions may improve later this year.
Chief executive Tony Lauritzen said on a first quarter results call that the LNG spot market has been “challenging”. But he added that while charter rates are low the volumes traded have been good.
He believes the market will improve later this year on the back of increased industrial demand and the winter seasonal uptick. Lauritzen said the company is also starting to see some potential for long-term buying interest in LNG.
Asked about Qatar’s plans to order over 100 LNG newbuildings, Lauritzen said he views it as a positive in that there will be more product in the market. However, he added that he does not expect to see many more speculative LNG newbuilding orders.
Lauritzen said all Dynagas LP’s six ice class vessels are on charter through the rest of 2020.
The first ship to become open will be the 155,000-cbm Arctic Aurora (built 2013) which is due to end the firm period of its charter to Norway's Equinor in mid-2021. The next vessel does not become open until 2026.
Dynagas LNG Partners logged a net income of $7.0m for the first quarter up from $1.9m in the same period last year.
Vessel utilisation for the quarter was 99% with an average daily hire on the six ships of $63,100 per day for the quarter, up from $57,700 per day in the same period last year.
Fleet utilisation is estimated at 91% for 2021 and 83% in 2022.
Reduced interest rate exposure
Lauritzen said the company made use of current historic low interest rate environment and entered into a floating to fixed interest rate swap transaction from the end of June until the $675m credit facility expires from June through to 2024.
He said it is key development of the company’s strategic plan to reduce its exposure to interest rate volatility while securing low-cost debt.
“Going forward we intend to continue to reduce our debt, build equity over time, strengthen our balance sheet and our position for future growth initiatives, he said.
Chief financial officer Michael Gregos said the company is “extremely pleased" that it has no debt maturing until September 2024.
He said for the first quarter interest expenses were reduced by 33%. But once the interest rate swaps kick in interest expenses will be cut to $5.5m per quarter, down on the $8m for the first three months of this year and the $12m logged in 2019.
“Balance sheet protection is out top priority,” Gregos said.
Dynagas said the partnership expected to generate about $3m per quarter in free cash after debt service and payments to its unit holders
Gregos said the company is thinking about this extra liquidity but it was too early to talk about fleet expansion.
